Opinion | Is Elon Musk still fit to run Tesla?

It’s hard to look at the news lately without Elon Musk being at the front and center of things. His recent $44 billion acquisition of Twitter and the resulting turmoil have been feeding the headlines for a month. But there’s much more at stake than just his social media giant; Musk leads other multi-billion enterprises, Tesla and SpaceX. Which makes his oversight of The Boring Company and Neuralink seem like hobbies. 

In other words, Musk has a lot on his plate, which leads to the logical question of whether he’s still capable of leading Tesla. There’s significance in this query because Tesla is a publicly traded company (his other ventures are private) and is the dominant brand in the exploding world of electric vehicles. 

Let’s look at both sides of the story to see if Musk is worthy of retaining his CEO title at Tesla.

Musk’s hits with Tesla

Marketplace leadership: It’s hard to argue that Tesla is the undisputed champ in EVs. According to Autonomy, 65% of EVs registered this year (through September) were from Tesla. In addition, the company holds its own against traditional luxury brands that are still mostly selling ICE-powered vehicles. Tesla sold more cars in the U.S. in 2021 than Lexus, Mercedes-Benz, or Audi and fell short of beating BMW by 24,000 vehicles. Competitors are nipping at Tesla’s heels, but the automaker is unlikely to lose its leadership position soon.

Trendsetter: Tesla’s influence is easy to spot throughout the auto industry. How many vehicles had iPad-like display screens before the Model S hit the market in 2012? The answer is zero. Similarly, other automakers are playing catch-up with over-the-air update systems and autonomous driving features. 

Unique business model: The idea of selling cars without franchised dealers never entered anyone’s consciousness before Tesla came on the scene, a move duplicated by EV startups like Lucid and Rivian. The company also limits its offerings to a few high-margin models, giving it better profitability than many competitors. It ties into a stock that’s increased more than 13,000% since going public. 

Supercharger network: Tesla’s aggressive rollout of its recharging platform continues to give the company a leg up against other EV producers. These competitors are forced to partner with third-party charging providers and undertake the development of their own charging networks in an attempt to catch up.

Musk’s misses with Tesla

High employee turnover: Working in a high-pressure environment isn’t everyone’s cup of tea, especially when the big boss is known for working 100-plus hours a week and sleeping on the factory floor. Tesla’s 44% turnover rate among executives who report directly to Musk is significantly higher than the 9% average among comparable businesses. These are key personnel, especially as Musk’s attention gets directed elsewhere.

SEC problems: Musk may believe his wealth grants him the right to uncensored speech, but the U.S. Securities and Exchange Commission feels otherwise when you’re talking about a public company (Tesla). Musk’s 2018 comments on taking the business private raised the specter of fraud charges. The matter was settled with Musk losing his chairman title and $20 million in fines for both Tesla and Musk.

Shareholder lawsuit: A legal action by a Tesla shareholder claims that Musk’s $50 billion compensation package is unjust enrichment enacted by a rubber-stamp board of directors. The suit is still being litigated, but it means that company money is being spent on lawyers while some employees focus on something other than building and selling cars. 

Redirection of Tesla resources: The mass departure of software engineers from Twitter left Musk in a bind, so he pulled as many as 50 Tesla coders to temporarily work at Twitter. Musk claimed the employees did this on a “voluntary basis” and only worked after hours, but it’s safe to say these Tesla staffers weren’t operating in peak condition following late nights and weekends at Twitter.

Policy violation: Tying back to high employee turnover at Tesla, the fastest way to cause a problem in the ranks is inconsistent treatment, primarily when leadership isn’t held to the same standards as everyday workers. Musk’s smoking of marijuana on Joe Rogan’s podcast raised eyebrows because it violated Tesla’s policy about the activity (recreational use of pot is legal in California but not under federal law). An article from SHRM detailed how Tesla employees were fired for the same activity. 

Distractions: Finally, it’s fair to say that when Musk is putting out fires at Twitter or serving as chief engineer at SpaceX, he’s not being CEO at Tesla—no matter how many hours he works or where he sleeps. A reasonable argument can also be made that Musk’s 11-figure pay package of stock grants (he receives no salary) should demand his undivided attention towards Tesla. 

What should the future hold for Musk and Tesla?

Musk deserves every accolade for bringing Tesla to where it is today. Calling him a visionary or an EV prophet isn’t out of place. But the auto industry is transforming at a pace never before seen. Musk’s foundations alone will no longer serve Tesla now that mega billions of dollars are pouring in to take on the EV leader. 

It’s time for Musk to fish or cut bait when it comes to Tesla. The company’s $1 trillion market capitalization has been cut in half in a year, with distractions and market changes undoubtedly taking their toll. Musk should borrow Bill Gates’ and Jeff Bezos’ playbooks and step back from day-to-day leadership in favor of a more advisory role. 

Perhaps this idea is precisely what Musk has in mind, as a Tesla board member recently confirmed there have been discussions about a CEO replacement. Names in the rumor mill include former Volkswagen CEO Herbert Diess, who’s been out of work since August and is reportedly chummy with Musk.