Elon Musk appeared to be in a defiant mood Wednesday as he stood before employees at the Tesla factory near Berlin a week after an arsonist set fire to a pylon and paralyzed production.
“You can't stop us,” Musk, the company's chief executive, told workers in a giant tent next to the plant.
But there are growing signs that Tesla may not be as unstoppable as it seemed. The company's car sales are no longer growing at a breakneck pace. Chinese automakers and established brands like BMW and Volkswagen are flooding the market with electric cars. And Tesla has been slow to respond with new models.
Musk's numerous outside ventures and his penchant for making polarizing political statements and attacking people he disagrees with have raised questions about how focused he remains on managing Tesla. Wall Street is increasingly concerned about the company: Tesla's share price has lost a third of its value this year, even as major stock indexes have hit record highs.
“A bet on Tesla has always been a bet on Mr. Musk,” said Eric Talley, a professor at Columbia Law School who specializes in corporate law, governance and finance.
In an interview with former television host Don Lemon who streamed online On Monday, Musk downplayed the company's falling stock price as part of the cycle.
“stocks go up and down, but what really matters is whether we make and deliver great products,” Musk said.
The week-long production stoppage at Tesla's Grünheide factory, the second this year, was only a temporary setback. But the drop in the stock price indicates that investors are reevaluating Tesla's long-term prospects and are no longer sure that the company (which is still worth more than any other automaker) will one day dominate the industry.
Musk can take much of the credit for prompting other automakers to focus on electric cars, showing that they can be practical, profitable and fun. Tesla's Model Y sport utility vehicle was the best-selling car of any type in the world last year.
But Tesla hasn't added a mass-market vehicle to its lineup since the Model Y went on sale in 2020. Chinese automakers like BYD, SAIC and Geely Auto are launching dozens of new models. Analysts said Tesla's Cybertruck, a futuristic pickup truck that went on sale in limited numbers last year, would likely appeal to a relatively small group of buyers given its high price and unconventional design. And although Tesla is working on an electric car that would cost around $25,000, it is not expected to go on sale in large quantities until 2026.
“I'm a little surprised right now that the following hasn't happened,” said Michael Lenox, a business professor at the University of Virginia who studies industries experiencing technological upheaval.
Tesla has repeatedly adjusted prices in response to demand, lowering them to boost sales and then sometimes raising them again. While the cuts have helped make electric cars more affordable, analysts say the strategy has eroded the company's profits without doing much to boost revenue. The cuts have also drastically reduced the resale value of Tesla cars, because no one pays more for a used car than a new one.
The strategy trains potential buyers to “wait for a deal,” Gary Black, managing partner of the Future Fund, said in X. Black, who has more than 400,000 followers on Musk-owned X, has long been a Tesla bull, but the fund recently sold some of his stake in the company.
Tesla faces particularly intense competition in China, the world's largest auto market, where more than a third of new car sales are electric. BYD surpassed Tesla in global electric vehicle sales in the last three months of 2023 with a wide range of cheap sedans, sport utility vehicles and subcompacts. Its Seagull model sells for less than $12,000 in China.
Even after Tesla's price cuts, Model 3 sedans and Model Y SUVs made in a Shanghai factory are much more expensive than many Chinese models. European and Chinese automakers are also introducing new electric vehicles at a rapid pace. More than 150 will go on sale by the end of the year, according to HSBC.
At the same time, Tesla is not well positioned to compete in the luxury market because its cars don't offer as many amenities as those made by companies like BMW or Mercedes-Benz, said John Helveston, assistant professor of engineering management at George Washington University. who has studied Chinese car-buying habits.
“In China, there are so many great options that Tesla just falls in the middle,” Helveston said. “It is a car that is too expensive for the luxury it offers.”
Tesla has not told investors how it will regain ground in China, the country that generates most of its sales. The company did not respond to a request for comment.
“What will they pull out of their toolbox besides price cuts to stay in the mix in 2024?” asked Tu Le, CEO of Sino Auto Insights, a research firm. “The price reduction tool has lost its effectiveness.”
Musk's disdain for the established way of doing things, as well as his love of big engineering challenges, has made it difficult for Tesla to bring out new products quickly, Helveston said. The Cybertruck is an example. It is made of stainless steel, which resists rust better than conventional steel but is very difficult to work with. The truck arrived two years late and consumed resources that could have been used for products with broader appeal.
“Tesla could do much better if it had been less aggressive in trying to make everything new and used half the knowledge that works,” Helveston said.
But doing new things excites Musk, who laughed with joy when he told Lemon about the revamped version of the company's Roadster sports car, which he said Tesla planned to launch at the end of the year. The vehicle will combine technology from Tesla and his rocket company, SpaceX, “to create something that's not really a car,” he said.
In Europe, the Model Y was the best-selling electric car last year. But Volkswagen and its Audi, Skoda and SEAT brands together sold more electric vehicles than Tesla on the continent, according to Schmidt Automotive Research. Sales of the Model Y fell at the end of the year after Germany and other countries cut subsidies.
Tesla could also suffer from restrictions that the European Union is considering imposing on Chinese imports. All Model 3 sedans sold in Europe and the right-hand drive Model Y for Britain are imported from Shanghai. According to Schmidt, Tesla accounts for one in four Chinese-made cars imported into Europe.
“This would reduce what have been impressive, if increasingly slim, profit margins and create a more level playing field for European automakers that have been manufacturing locally,” said Matthias Schmidt, founder of the research firm. He noted that France had taken its protectionist policies a step further by restricting government subsidies for the purchase of electric vehicles to those produced in the European Union. Italy has indicated it could do the same.
Musk is also a source of uncertainty. In January, a Delaware judge voided his pay package, worth more than $50 billion, saying Tesla's board used a flawed process in negotiating his compensation. In response, Musk threatened to move Tesla's corporate registration from Delaware to Texas.
Tesla's board of directors has not revealed a new pay package for him. Musk, who oversees SpaceX and several other companies in addition to Tesla and X, has threatened to pursue unspecified new ventures outside of Tesla unless he is given control of 25 percent of the company. He currently owns about 13 percent.
“Now we have a grumpy CEO,” said Talley, of Columbia Law School. “What does this bode for Tesla's ability to get Mr. Musk's attention? Is it possible that he simply leaves the company?
Musk's brief visit to Grünheide appeared timely to show employees in Germany, some of whom had expressed concern for their safety after the fire, that he remains committed to the company and the factory. The plant produces around 300,000 cars a year, but aims to expand that number to one million.
When asked by reporters if he intended to stick to that plan, Musk responded: “Yes, absolutely.”
Mara Hvistendahl contributed reports.
