Why Tesla's Troubles Don't End With Elon Musk

Forbes

In a candid conversation, Forbes Breaking News reporter Brittany Lewis and Senior Editor Alan Ohnsman delve into the pressing challenges facing Tesla. They dissect the dramatic decline in vehicle deliveries and the struggling core business of electric vehicles, batteries, and charging services. The discussion also highlights the impact of Elon Musk's brand damage and political pursuits on the company's European and North American markets. Ohnsman further explains how the expiration of federal incentives will severely impact Tesla's sales in the coming quarters, painting a bleak picture for the future of the EV giant's primary revenue streams.  Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

Transcript

00:00Hi, everybody. I'm Brittany Lewis, a breaking news reporter here at Forbes. Joining me now is

00:07Alan Oinsman, senior editor and author of The Current Climate Newsletter. Alan, thanks so much

00:12for joining me. Hi, Brittany. Great to be with you. Numbers from Tesla's second quarter are

00:18historic, but not in the way a company would like. Tesla saw its biggest ever year-over-year

00:23decline in vehicle deliveries. So now as we sit here at the beginning of Q3, what problems does

00:29the company face? Well, unfortunately, it's more of the same. We saw this in Q1 and the problems

00:39continued in Q2. Its core business is selling electric vehicles, selling charging services,

00:47and selling batteries. And we don't know all the details for charging services and battery sales

00:55yet. But the biggest chunk of Tesla's revenue, electric vehicles, down a lot, about 13.5%

01:01in the quarter. Just dramatic declines, especially in Europe. They were down in China. They were down

01:07in North America. And this comes after a rough Q1. There was some hope that a refreshed version of

01:15the Model Y was going to help boost sales a little bit. In Q2, that did not materialize.

01:21Cybertruck, the newest product, the sales are small enough that Tesla doesn't even bother to break them

01:29out. It's lumped together with Model S and Model Y in this kind of other product segment. And that segment

01:37was way down. So, you know, Cybertruck has not delivered anywhere close to the types of numbers

01:43Musk was promising a couple of years ago. So it was a pretty rough quarter. We'll know in a couple

01:49weeks when they do earnings what those other business areas looked like. The excitement for Tesla for a lot

01:57of investors is new businesses. But, you know, I'll be a broken record on this one. 95% of its revenue

02:06comes from cars, batteries, and charging services. And if those businesses aren't strong, Tesla's not

02:12strong. And they need to really up their game there. And we saw no indication in Q2 that many of the

02:21problems they faced in their auto business, for example, have been addressed at this point.

02:25And to that point, those businesses aren't strong in Q2, another rough Q1. What has Elon Musk said

02:33about all of this? Not a lot. I mean, most of, I think most of his conversation has been pinned on

02:39Robotaxi and new businesses. And so put all your faith and hope in those areas. Those may prove to be

02:48great new sources of revenue at some point. But as I also like to say, today, you cannot realistically

02:55calculate or forecast, say, robotaxi revenue. They're operating a limited pilot program in Austin

03:02charging a token amount per ride. So there's no meaningful revenue from that. You know, even when it gets

03:10to $100 million, $200 million, $400 million of revenue, when does that happen? I couldn't begin to tell you

03:16because we don't really know when this project or program is going to be able to scale. And at the

03:24same time, Tesla's just getting hammered by BYD and a lot of the Chinese manufacturers and Hyundai and

03:32Kia and General Motors and many other automakers that have added a great many competitive products

03:38in, you know, in its core business and has not refreshed its product line. So that's a very simple

03:47issue. And unfortunately, the company has not focused on compelling new products at this point.

03:53So that certainly should be of concern. The stock has fallen a bit now. And you raised the point

04:02about, you know, what some of the concerns are there. Tesla, one of the reasons Tesla's down is

04:07not just competition. It's that Elon Musk himself has done some damage to the brand. His image is not

04:14great. His work in Doge and with the Trump administration was not helpful for the Tesla brand.

04:22That's one reason why Europe in particular, Tesla has been down so precipitously. It's way down here in

04:30California, where I am. China has been Tesla's best market. The Chinese don't really care about

04:37Doge or, you know, Musk's association with the Trump administration. That is not of consequence.

04:43But Tesla's just failed to stay competitive in the Chinese market. You know, Xiaomi and BYD and

04:50NIO and just all these interesting, you know, Chinese EV companies just keep adding really exciting

04:57new products that are better priced, more features, all sorts of things. And Tesla is just not showing

05:04the kind of competitiveness that you would want to see for a company that at least at the end of 2025

05:09was technically still the world's leader in EV sales.

05:13And you and I have talked before about the three camps of Tesla's problems, competitors,

05:20product issues, and Elon Musk and his brand issue. And I want to talk about that

05:24because Wedbush analyst Dan Ives said that Tesla's board, quote, needs to act now and set the ground

05:30rules for Musk going forward around his political ambitions and actions. And he posted three steps

05:35for Tesla's board on X. He said this, quote, new pay package getting Musk's 25% voting control clears a

05:42path for XAI merger. Guardrails established for amount of time Musk spends at Tesla as part of pay

05:48the package and oversight on political endeavors. That's a lot of monitoring for a CEO. What do you

05:55make of those recommendations?

05:58You know, certainly Dan thinks those would be helpful. I mean, I would say, where has the board

06:04been for the last few years? Because if you are holding your breath that Tesla's board is suddenly

06:11going to get firmer with Elon Musk, you know, you may be in for a rude surprise. His public behavior

06:19has, shall we say, deteriorated to some extent over the last few years. You know, calling people

06:26pedophiles, claiming he had money to take the company private, any number of inflammatory comments

06:32on Twitter and X over the years. And then his political involvement before he decided he was

06:40forming his own political party. And Tesla's board did nothing. There's no indication that they have

06:47any ability to reign in Elon Musk at this point. That's simply like objectively the reality. So I think

06:56that's quite a wish list from Dan Ives. I wouldn't hold my breath that any of those things are going to

07:02happen. That has been an ongoing issue. And I think you can talk to any number of experts in corporate

07:09governance who just roll their eyes when they, you know, look at Tesla's board and its failure to

07:15really actively try to set some restraints and some guidelines for Elon Musk. And I really cannot

07:23think of another company where this is the case, where a CEO, his public behavior can be very damaging

07:32and the board consistently does not get involved. So, you know, good luck with what Dan's asking for.

07:41But I'm not optimistic any of that's going to materialize.

07:44And Dan's wish list was compared to essentially babysitting Elon Musk. And Elon responded directly

07:50to that on X. He said, shut up, Dan. And Tesla's board of director is made up of nine people. Two of them

07:57have the last name of Musk, Elon Musk himself, as well as his brother, Kimball Musk. There's seven

08:03others. Have they ever tried to restrain Elon Musk in the past? I mean, what's the point of having a

08:09board of directors if they see these problems and don't really do anything? There is no public

08:16example I can point to of where the board did intervene. It looked like perhaps after Musk left the

08:26Trump administration and he left on good terms, but then immediately got into a social media fight

08:34with Trump over the budget bill and things got ugly. And then he dialed it back. When he dialed back,

08:44perhaps that was the board saying something quietly. But then, of course, it all just, you know,

08:50exploded again, leading him to announce he was creating his own political party, which, you know,

08:59is an interesting development. And that political party is the America Party. And he announced that

09:05over the weekend. By Monday, his net worth plunged by 12 billion dollars. I mean, he's still the richest

09:11person in the world by and the second person being Larry Ellison. And Elon Musk has over 100 billion

09:16dollars more than Larry Ellison, as you and I sit here right now. In this case, do you think money

09:21talks, though, when it comes to Elon Musk? And does that matter? Will he listen? Because he's so rich,

09:28it almost essentially won't affect him. I think I think there's an argument for the latter there that

09:35I don't know if that really how to what extent that that really impacts his judgment at this point.

09:42I think he's going to do what he wants to do regardless. And, you know, certainly all indications

09:48are that if this is something he wants to do, he's just going to do it. You know, it does underscore

09:55this issue that we had seen, though, earlier in the year, where so many of his public comments and

10:01actions from Doge to different things he was he was tweeting were clearly very, very damaging to the

10:08Tesla brand. And starting a political party has nothing to do with the bottom line of any of his

10:21companies. You know, it is it is so separate and removed. And again, everything with with Elon Musk

10:29is unprecedented. I can't point to an example. You know, Ross Perot, who was a very successful

10:35business person who had one of the most impressive independent party runs in US history. He didn't

10:42really start a political party. He did start a political movement of sorts. It didn't survive

10:47him. It doesn't continue. It was just about him. Musk himself, being born in South Africa, can't run for

10:56president of the United States. But he can certainly fund a presidential campaign, limitless funding.

11:03And apparently he's been in talks with Andrew Yang. And so, you know, maybe he'll cobble something

11:09together. But right now, it would seem that any political party he puts together is more of a

11:15revenge act against Trump and the Republicans and would would really that that's who's most likely to

11:21be damaged in future elections. And what's interesting about Elon Musk, too, is that he the brand

11:29problem is multifaceted because he says erratic things. He has reportedly a very erratic personal

11:36life. He also is seemingly spread too thin for any CEO. He's involved in politics. He's very outspoken

11:43politically. Can Tesla's board, can Tesla investors look at Elon Musk and directly say, hey, your actions

11:50are directly impacting our bottom line, A, and B, any chance he's going to listen to that?

11:58Well, they certainly should have been saying that for quite some time because it is objectively

12:03reality. It simply is. And if they're not saying that, that's really, you know, that speaks to what

12:11a poor job they're doing as the board of a public company and paying attention to their fiduciary

12:17responsibility. So objectively, 100 percent, they should be doing that. Whether he if they are doing

12:25that and he's ignoring it, well, then that's also a problem because he at the end of the day does

12:30report to the board. Would they ever be in a position to say, OK, well, we're going to relieve

12:38you of your duties here? I don't know that that's going to happen. There was that Wall Street Journal

12:44piece, I guess, from a few months ago where they were quietly floating a job search and looking for

12:49potential candidates. And a couple months ago, I put my own list together of five people that I

12:55thought might be able to do the job. You know, Tesla doesn't have what SpaceX has. It doesn't have

13:02a Gwen Shotwell. Gwen Shotwell at SpaceX is the president and COO, but she's really been de facto

13:10running that company for 20 years. There is no equivalent to a Gwen Shotwell at Tesla.

13:18You know, recently, a key lieutenant who ran North American and European operations just left.

13:24I think I saw overnight a report that another key tech person who is developing Tesla software just

13:31resigned. I, you know, the number of high ranking Tesla executives who could roll into, say, a CEO

13:42position or even a COO position, very few, very small. It does not publicly have a deep bench

13:48of talent, a narrow C-suite. So it puts things in a problem. You know, there's no one immediately in

13:58the company that the board could turn to and say, can you, you know, can you run things on a day-to-day

14:02basis? So I, you know, it's very, it's very murky, like, you know, where things are going to go

14:09with Tesla. If Musk continues with this push to create his America Party and that becomes a thing,

14:16on top of supposedly being Tesla CEO at SpaceX and X and Boring Company and XAI and everything else,

14:28you know, that's, that's just too much for it. No one can do that. They're only 24 hours in the day.

14:33And, and I, and it's just untenable. And yeah, should the board be standing up and saying you,

14:38you really need to like do less and, and especially things that are harmful to the company? Yes,

14:44they should be. Is he going to listen? I, I, I think, you know, as of today, that's unlikely.

14:52And he's also facing another headache at X, a high ranking person at one of his other companies

14:57is now out. Linda Yaccarino, what do you make of that? And what really does that mean for Elon Musk

15:03when he's already, and his board is viewing him potentially as being stretched too thin and having

15:09other priorities at other companies? Well, when he bought Twitter, you know, he was initially

15:15the CEO and that upset people because they said, look, you're already doing too much. And now you're

15:20taking on the duties of yet another company, uh, by running that. And so to, to pacify, uh, folks,

15:27he, he hired Linda Yaccarino to be the functional manager. Um, and, uh, you know, she survived two

15:33years in that role, uh, left somewhat unexpectedly. Um, and, uh, there has been no announced replacement

15:42as we're talking at this moment. Um, perhaps that'll change, uh, within a day or so. Um,

15:49but it does raise this new issue of, of, of, you know, does he now go back and is he the de facto,

15:55um, CEO for yet another company, uh, which is more of a time suck, you know, when he's already trying

16:01to do a lot of things. Um, you know, the other issue of course is Linda Yaccarino has been in a

16:06very difficult position because, uh, as, uh, as X, you know, it's Twitter's taken a, uh, a very dark

16:16turn. It's, it's become very controversial for the types of content on there, the lack of restraint,

16:22um, uh, and, uh, a lot of advertisers had of course fled the platform over the last couple of

16:30years. It seemed like for a period this year, because of Musk's association with the Trump

16:34administration. Um, and, uh, the fact that, that X Twitter was being used as such a important platform

16:42for some news announcements that it was starting to trend back up again. What we saw shockingly within

16:49the last few days, of course, was that Grok, the chat bot integrated into X that's created by XAI

16:57has just gone nuts with crazy anti-Semitic racist stuff. Um, no clue why no one was stepping in,

17:08intervening much faster to stop that. Uh, but it got particularly terrible on Tuesday.

17:15And then the fact that Linda Yaccarino left the next day, I mean, was that a factor in her,

17:20in her final, uh, decision? One would think possibly because her role was to get advertisers to come back

17:26to the platform. Um, it's pretty hard to get Disney and McDonald's and Coca-Cola and Budweiser

17:34to advertise on a platform that is actively, you know, that has an AI on it that's actively

17:39spewing anti-Semitic racist nonsense. I mean, who wants to advertise on that? So it kind of put her in

17:46an impossible situation. Um, so I, perhaps that was the final straw. I mean, we'll, we'll find out as time

17:54goes on, but it's a big concern, uh, what's going to happen in terms of who's going to manage it.

17:59Does that now mean he's got to spend more time with it, which means less time for Tesla and all

18:03his other companies. Alan, one of our conversations, one of our first conversations, when we started

18:09talking more frequently about Elon Musk and Tesla was the theme that things are bad at Tesla right

18:14now and they are probably going to get worse. So when you're now looking at Q3, when we're sitting at

18:19the beginning of it, what signposts, what specifically are you looking out for next?

18:26Uh, I'm, I'm a simpleton. So in my case, um, I keep looking at the same things, which is the core

18:31business. Um, to, to, to me at this point, I'm not an investor. I'm a reporter. Um, when he talks about

18:39AI, robo taxis and humanoid robots, I think that's very interesting. Fine. Work on that,

18:46turn that into a business someday. But I want to see, uh, how is your core business that pays the

18:52bills that, you know, that, that, that, uh, boosts your stock price. How is the core business doing?

18:59And the core business does not look great. And of course we didn't mention this, but, but the other

19:03factor is Tesla has been the biggest beneficiary of federal incentives, uh, for its customers, uh,

19:09for, in the form of EV tax credits. Uh, those are now going away at the end of September. Um, so that

19:15suggests that at the end of September, which is the end of Q3, uh, that does not set things up well

19:20for both Q3 and Q4. Um, so, you know, you were getting a $7,500 tax credit if you bought a Tesla,

19:27uh, today and you will continue to get that up until the month of September. But after September,

19:32they're gone. Um, that's going to affect sales for everybody, the entire industry. Um, the pullback

19:38by the federal government on many of the incentives that were created for federal support for, um, charging

19:44infrastructure. Tesla has been making money, millions of dollars, uh, in federal contracts

19:49for charging services, uh, because it opened up its network to other EV brands that could now charge

19:55it at Tesla superchargers. Um, those funds go away. The support for that goes away.

20:00It's battery business for energy storage, especially large scale energy storage, um, has benefited from,

20:07the IRA, Biden's IRA, uh, federal incentives for those types of projects that goes away. So a lot of the

20:13supports that Tesla has benefited from, I mean, Elon Musk was one of the biggest critics of President

20:19Joe Biden, but Tesla was this, you know, arguably in the auto space, the single biggest beneficiary

20:24of Biden's policies. All of that is going away. So what that tells me is the first half stunk,

20:31uh, in terms of sales, uh, there's nothing to indicate Q3 and Q4 will be better. And especially as the year

20:39continues, Q4 looks particularly tough, uh, right now. So that story saying things are bad at Tesla,

20:48they're going to get worse. Unfortunately, um, that remains the case. Um, the future is not

20:54great for the core business in the months ahead. Well, I think that means we have plenty of

21:00conversations that are still get to be had. Alan Oensman, thanks so much for joining me.

21:06Thanks, Brittany. Great to be with you as always.

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