Elon Musk insists that Tesla is an A.I. company. Never mind that the company makes almost all of its money selling cars, or that it sells more electric cars than any other company in the U.S. and that it currently produces the best-selling car in the world. It is not a car company, Musk insists. It's an A.I. company. Sure, fine, whatever. But if that's true, he ought to let someone else make the cars.
Because as its CEO has gotten increasingly bored of the car market, Tesla has started to slip in the car market. Its market share is declining. Its newest product is expensive, fraught with quality problems and late. It has had to cut prices again and again and again to improve demand for its core products. Its flagship sedan and SUV are built on a platform that debuted during Obama's first term. The Semi is still nowhere. The Roadster doesn't exist. The Model 2 might be dead.
No wonder Musk doesn't want Tesla to be valued as a car company.
He focuses his public comments, his product strategy and his earnings calls on Tesla's progress with A.I. He promises that Tesla will solve autonomy. The whole value of the company, he says, is contingent on Tesla's lead in A.I. and autonomous vehicles.
"If you value Tesla as just like an auto company[...] it's just the wrong framework. And if you ask the wrong question, then the right answer is impossible. So, I mean, if somebody doesn't believe Tesla is going to solve autonomy, I think they should not be an investor in the company," Musk said on the earnings call.
Analysts are buying it. Morgan Stanley's Tesla Analyst Adam Jonas considered Tesla's "auto business" to account for just 20% of the stock's $310 per share value. Other firms have similar approaches. They see great potential in Tesla's A.I. business, from autonomous driving to building humanoid robots that can work factory jobs.
I do not believe that Tesla has demonstrated any leadership in solving autonomy or generalized A.I., except maybe running a not-autonomous driver assistance system and extremely limited hardware.
Regardless of how you assess its current position, though, Tesla has two exceedingly complicated problems to solve. The first is to maintain its dominant position as one of the world's most sophisticated, popular and profitable electric vehicle companies. The second is to wholly transform into an A.I. powerhouse with a fundamentally reshaped business model.
Both markets are important. But it's clear that Musk only cares about one. So why not spin the carmaking arm into a separate business, and let a true adult run that execution-oriented, capital-intensive business?
The truth is that long-term, long-game carmaking isn't built for Elon Musk. Selling millions of cars per year means accurately planning years out, something that just isn't in his skillset. It requires diligent work with regulators, slow, plodding investments in service and retention and constant tweaks to price and product strategy. It prioritizes slow improvement over rapid reinvention, for better and for worse.
It's Musk's worst nightmare. He has built an empire on rapid growth. Take an untapped market, exploit it first and outmaneuver competitors in an ever-changing landscape. Be whatever the shareholders want you to be. Use any model, piss off anyone as long as it keeps the stock going up. Forget steady profits. Sell infinite growth. A boundless horizon. Don't give people want, decide what they want and sell it to them.
It's a strong playbook for a startup. No meteoric stock gain is based on slow, consistent improvement, it's based on growth. This approach is perfect for an A.I. company that needs to be nimble, and Musk is right that he's probably the best to lead it. I don't want Elon Musk having the power to shape what the future of A.I. looks like, but I get why investors put money behind him. Do you really think anyone is going to get in his way?
The only person who consistently gets in Musk's way is Musk himself. The man's quick, gut-driven pivots don't seem to work out well when the business is mature. He's prodded every dial and button at X—nee Twitter— and the result is clear: The website that once defined the online conversation is now a cesspool of spam and bigotry. It's never had a worse relationship with its advertisers. And its CEO has never been so radioactive.
And yet America can't afford for the same fate to befall Tesla's auto-making efforts. The company is just too important. Very few other automakers right now offer such a compelling slate of EVs backed by Silicon Valley-grade software, a dealer-free buyer experience and an internally built, reliable charging network. Tesla is not just important to the EV market; it is important to the U.S.' strategic geopolitical position. It is the only large-scale EV manufacturer in the country that has global relevance, the chops to compete with Chinese EV manufacturers and an existing, satisfied EV customer base.
It doesn't need a disruptor in charge. It needs an executive. One who executes. Someone who can helm a complicated, large organization while retaining the institutional knowledge and talent to keep its edge over the competition. It doesn't need to solve autonomy to succeed.
It needs a suspension team that doesn't rotate through 20-somethings every six months, giving us no real clue whether the Model 3 Performance will outdrive an M3 (like the last one) or end up a total mess (like the Model S Plaid).
It does not need one big swing. It needs a million little decisions, made by a CEO that isn't distracted by SpaceX, X, Dojo, autonomy and anger over "the woke mind virus."
It needs its own leadership, its own organization, its own name. Call it The Car Company. Or X Auto. Or Bob, for all I care. Let Elon keep shipping cars with "FSD Supervised," but have that be software licensed to X Auto by Tesla, the A.I. Company. That gives the A.I. division the name Elon wants, a guaranteed buyer for its flagship product, access to fleet learning data from X Auto and the ability to sell autonomous software and humanoid robots to whoever he damn-well pleases.
Meanwhile, The Car Company can focus on what really matters: Making cars that people want to buy. Redesigning the Model S. Switching the Model 3 over to an 800-volt architecture. Building out V4 Superchargers.
These projects all surely sound boring to Elon Musk. That's exactly why he shouldn't be in charge of them.
Contact the author: Mack.hogan@insideevs.com.
