Is Elon Musk bad news for Tesla?

The electric vehicle maker Tesla sits at the cutting edge of change in the automotive industry. It is the leading light in the sector’s transition away from petrol and diesel usage. And yet, for some time, investors have had a love-hate relationship with the company. Much of that comes down to how they view its maverick Co-Founder and CEO Elon Musk. At the helm since 2004, Musk has had a long-term strategic goal to create affordable mass market electric vehicles. His challenge was to start with a premium sports car aimed at early adopters and then switch into more mainstream vehicles, including saloons and affordable compact cars. However, this vision has been at the core of much of the tension between Musk and the investment analyst community, many of whom are still unconvinced that an inexpensive vehicle can be produced on a large scale. Musk has not hidden his dislike of Wall Street and how it views the company. And as he has consistently shown, he is no follower of convention or tradition. But given that he still owns 20% of the company, Tesla’s fortunes remain entwined with his involvement. Recent company performance has been supportive for the share price. For much of March, it seemed entirely possible that the Coronavirus could pose an existential threat to Tesla. The company had temporarily shut factories and was facing a rapidly deteriorating economy. But while the company is not yet out of the woods, Musk helped steer a near-term positive course for Tesla having reported quarterly net profit of $16 million.

Trailing 12 months vehicle deliveries

Tesla emphasized that this was the first time the company had earned a net profit in the first quarter, which is generally a tough time for auto sales. These results also marked the third consecutive quarter that Tesla beat analyst expectations. Tesla also said that the Model 3 cars it produces in its Shanghai Gigafactory are “approaching” the profitability of US-made models, indicating in part that the Chinese factory is running efficiently after just a few months. This is all in the context of the auto industry undergoing massive change, with old technologies becoming obsolete while new ones emerge. Tesla is leading the charge against the established incumbents. The company is now more valuable than the combined market value of Volkswagen, General Motors, Ford and Fiat Chrysler.
Tesla is worth more than Ford, GM and Fiat Chrysler combined
And yet Musk continues to provide headline news that unnerve investors. The shares recently came under pressure after Musk said the company’s stock was too high in a stream of tweets. This move was reminiscent of posts that got him into trouble with regulators in 2018. On that occasion, Musk settled a securities-fraud lawsuit with the US Securities and Exchange Commission over tweets claiming that he had the funding to take Tesla private. Musk is now no longer allowed to tweet about specific topics without advance approval from a Tesla lawyer. In relation to the coronavirus, he predicted in March that the US would probably have “close to zero new cases” by the end of April; in fact, it had more than 30,000 a day. Musk has continued to play down the seriousness of the pandemic, labelling lockdown restrictions “fascist” and tweeting “FREE AMERICA NOW”. Tesla sued local authorities in California as the carmaker pushed to reopen its Fremont factory there and Musk threatened to move the company’s headquarters to Texas or Nevada. Tesla filed a lawsuit against the county, calling the continued restrictions a “power-grab” by the county since California’s governor had said that manufacturers in the state would be allowed to reopen. The fact that he subsequently ignored the order and reopened the factory anyway can only have further annoyed the authorities. Tesla builds more than 415,000 cars a year at the Fremont plant and moving the entire production facility would be a massive undertaking. Estimates suggest it could take the company 12 to 18 months to relocate production. In a separate post, the billionaire also said that he’s selling “almost all” of his physical possessions and won’t own a house. This was at the same time as he qualified for Tesla stock options worth more than $700 million after hitting specific operational targets. All of this noise is what investors have to contend with. But for all the drama that surrounds Musk, there is much to respect in his vision for the world. He is fighting climate change and energy consumption through Tesla. He is preparing for artificial superintelligence with a project that aims to put implants into humans’ brains. In addition, he has commercialised the idea of space travel to Mars through his company SpaceX. So, regardless of his behaviour and the negative headlines, we can expect Musk to play an important part in tackling some of the biggest challenges the world is facing.
Any questions?
If you would like clarification on any of this information or you'd like to suggest a topic for a future newsletter simply reach us on 0203 697 1700 or email

All investments involve risk and past performance will not necessarily be repeated and is no guarantee of future success. You should carefully consider in the light of your financial resources whether investing in stocks and shares is suitable for you. 

This material has been prepared based on information believed to be accurate at the time of publication. Subsequent changes in circumstances may occur at any time and may impact the accuracy of the information.