It’s ‘Never Going To Happen,’ But A Distracted Musk Should Hand Over CEO Reins At Tesla
Tesla CEO Elon Musk appears virtually at the Alternative for Germany general election campaign launch.
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No one expected much from Tesla’s fourth-quarter earnings, since 2024 saw its first year of declining electric vehicle sales since going public 15 years ago. But revenue and profit results weren’t just limp — they were worse than analysts predicted. On the company’s earnings call, though, Elon Musk’s Reality Distortion Field was in full effect as he pumped the stock with tales of self-driving taxis, humanoid robots and as of yet unsupported claims of the company’s AI prowess.
Investments in those areas “will bear immense fruit in the future. Immense. In fact, at such a scale that it is difficult to comprehend,” he proclaimed on the Jan. 30 call. “I see a path–I’m not saying it’s an easy path–but I see a path here to Tesla being the most valuable company in the world by far … where Tesla is worth more than the next top five companies combined.”
That’s a ridiculous $15 trillion, but loyal shareholders bought it. Tesla’s stock rose 3% on Thursday and a further 1% on Friday. Buyers weren’t troubled that two fluffy items–a $600 million gain on crypto holdings and $692 million of EV credit sales–accounted for more than half of Tesla’s $2.3 billion net income in the quarter. (The first is highly volatile; the second is likely to plunge as Trump rolls back federal emissions rules.) Nor were they bothered that its closely watched gross profit margin for auto sales continued to slide when Tesla is known for enjoying margin premiums far above the auto industry average.
Sales of Tesla’s $100,000 Cybertruck have been below Musk’s expectations so far.
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The stock’s move “bore no relation whatsoever to the company’s financial performance… or to its outlook for growth in the coming year,” JP Morgan equity analyst Ryan Brinkman wrote, noting the company has become “completely divorced from the fundamentals.”
So as a meme stock, TSLA is doing great. But for how long?
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Because right now, Tesla is not an AI company. Its business is making cars and batteries and providing EV charging services; that’s the source of over 90% of its revenue. And to keep it growing requires a full-time CEO, not someone juggling a Trump administration role while also leading SpaceX, X, xAI, The Boring Company and Neuralink. A CEO who doesn’t risk harming the brand’s image by embracing politics or with controversial behavior wouldn’t hurt either.
“It’s Elon’s private company that is public for some reason”
“But it’s never going to happen,” said Tesla investor Ross Gerber, CEO of Los Angeles-based wealth manager Gerber Kawasaki. A long-time Musk fan and steward of his firm’s $100 million Tesla stake, he’s soured on him since his Twitter takeover.
Gerber knows what he’s talking about. He tried and failed to get enough votes to snag a seat on Tesla’s board last June. Not that it would have mattered much. Because of Musk’s 13% ownership stake in the company and tight control of its board, any management change would only be window dressing.
“Even if you put a new CEO in there, it would just kind of be, ‘sit here, but I’m still going to keep doing everything I’m doing,” he said. “If you buy the stock, you have to accept that it’s not going to be like a regular company. It’s Elon’s private company that is public for some reason.”
The other problem is that Musk has no clear lieutenant at Tesla who is running the show while he’s distracted. There’s no COO and no president. A number of VPs whose stars started to rise have been sidelined or quit.
Tesla shareholders who don’t buy Musk’s grandiose claims — the “Optimus” humanoid robot alone could generate “north of $10 trillion” — also have to face his increasingly bizarre behavior, especially for a public company CEO who is supposed to be answerable to a board of directors. But in this case, the board hasn’t interceded as it’s grown remarkably wealthy from Tesla stock. (Chair Robyn Denholm made a tidy $32.5 million profit in late November when she exercised 112,390 options as Tesla surged following Trump’s win.)
Well before Musk was accused of giving a Nazi-style salute at a Trump victory rally this month, his vitriolic commentary which has widely been decried as racist, anti-Semitic and transphobic was hurting Tesla’s reputation, particularly in the blue states that are its biggest markets for EVs in the U.S. Late last fall, Interbrand’s annual survey of the world’s most valuable brands showed a 9% decline for Musk’s car company.
That reputational hit is directly impacting Americans’ decisions about what car to buy. Strategic Vision, a San Diego-based research firm that surveys tens of thousands of consumers weekly, found this month that nearly two-thirds of potential new carbuyers say they definitely would not consider a Tesla as their next vehicle, up from 48% in 2023.
If you’re an automaker “playing a long game, that is unforgivable,” said Strategic Vision CEO Alexander Edwards.
It’s not like these problems aren’t clearly playing out in Tesla’s numbers.
Investor Ross Gerber speaks at a conference in Beverly Hills, California.
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Up until 2022, Musk was loudly predicting that Tesla’s sales would surge to 20 million units by the end of the decade. With Tesla’s global sales shrinking 1% in 2024 to 1.79 million units, he’s not talking like that now. The drop in the U.S. alone was larger: 5.6%. And it’s even worse in California, North America’s top EV market, with a 12% percent slide. Meanwhile, sales to EU countries are tumbling as well, they fell 13% last year.
Tesla’s U.S. sales aren’t likely to grow much or at all again this year, owing to tough competition from General Motors, Hyundai, Kia, Honda, Rivian, Lucid and other auto brands that keep rolling out more, and cheaper, EVs. Tesla’s $100,000 Cybertruck, a military-style pickup that looks like it’s out of the video game Minecraft, has been a sales dud, reaching less than a quarter of the 250,000 annual rate Musk anticipated a year ago. The long-delayed Tesla Semi is in the works for 2026, but it’s unlikely to generate significant sales volume. Not surprisingly, Musk didn’t set a firm sales target for 2025, beyond expecting volume to rise thanks to a refreshed Model Y and cheaper cars due in the first half of the year.
“Machine learning has no common sense; it has false confidence.”
Which explains why Musk is betting the company’s future on self-driving robotaxis — another in a conga line of overhyped promises.
Musk says that if all goes well Tesla will launch an autonomous Cybercab in 2026. But that seems unlikely when the company has not yet mastered its “Full Self Driving” feature which requires driver supervision and has led to at least 13 crashes and multiple government investigations. And it seems even more so when Tesla’s version of self-driving cars navigate with only cameras and without the radar and laser lidar that has made Waymo — which already operates a viable robocab service in multiple cities — the industry leader in autonomous driving.
Tesla’s Cybercab robotaxi on display at the 2024 Los Angeles auto show.
AFP via Getty Images
“Humans drive without shooting lasers out of their eyes, unless you’re Superman,” Musk said this week. “Humans drive just with eyes and a… brain. The digital equivalent of eyes and a brain are cameras and digital neural nets or AI.”
It’s a good line but a bit of an eye roll.
“There are two problems with that analogy,” said Phil Koopman, an associate professor at Carnegie Mellon University who studies autonomous vehicles. “One is that people’s eyes are really amazingly good and Tesla cameras kind of suck at night,” when they often fail to properly detect road hazards in the dark, he said. And second, whereas humans often respond well to new and unknown driving conditions, Tesla’s software struggles. “Machine learning runs out of steam before you get to common sense,” he said. “Machine learning has no common sense; it has false confidence.”
With Tesla there’s another false confidence as well — in Musk and the idea that his shiny object plans for Tesla’s future are a smarter play than improving the things it’s already doing.
“Tesla’s a phenomenal business just focused on climate change–sustainable transportation and energy,” Gerber said. “The fact that it’s now advancing robotics and Cybercabs is just his pivot away because nobody wants to buy his products — because of him. But they’re still incredible products and people buy them anyway.”