Make no mistake: Whether CEO Elon Musk eventually gets his highly contested $56 billion payday or not, this week will determine the future trajectory of Tesla. Because if a much-ballyhooed shareholder election doesn't go the way Musk wants, this company could look very different at its next annual meeting.
This Monday edition of our Critical Materials morning news roundup sets the stage for one of the biggest moments in corporate governance we're likely to see this decade. Also on tap today: why investments in giant battery factories seem to be slowing down, and a few more details trickle out on Fisker's internal strife.
30%: Does Musk Have The Votes?
This Thursday afternoon is Tesla's Annual Shareholder Meeting for 2024, and as we've written before, a few crucial items have been put to an investor vote over the past few months. In particular, they include reincorporating in Texas instead of Delaware; reelecting two directors, including Musk's brother Kimbal Musk; and perhaps most crucially, whether or not to reaffirm a giant pay package for Musk that a Delaware Chancery Court judge spiked after an investor's lawsuit earlier this year.
As several legal experts have noted, this vote will not magically give Musk the $56 billion pay package he was originally granted in 2018. But the shareholders declaring such support for him could move things in that direction with an appeal or a new hearing.
If it doesn't happen, Musk and his board chair have repeatedly intimated he will pursue AI and robotics projects—which have captured most of his attention these days—"outside of Tesla," meaning it could see his departure from the company. This week's vote, then, is a referendum on Musk's leadership and whether or not the company's future will see him at the helm.
Given how much Musk has increased Tesla's stock price over the years, it seems like a no-brainer for investors to vote yes. But as Reuters notes today, big, institutional investment firms have been skeptical of Musk's leadership at Tesla (or perceived lack thereof) as its sales and future product plans seem to slip, all while the CEO seems distracted by his ownership of X and being active in the culture wars. (He spent a lot of Friday morning posting memes about Dr. Anthony Fauci, for example.)
So with the big shareholders seemingly mixed, Tesla has launched an aggressive advertising campaign aimed at smaller, retail shareholders instead—it's the most advertising the company has ever done, really.
But retail investors infamously barely turn out for these elections, even if your average $TSLA shareholder is ostensibly more engaged than most. So does Musk have the votes or not? The intensity of this push mere days before the meeting has some observers wondering that he may not. From Reuters:
In a post on his social media platform X on Saturday Musk wrote: "So far, roughly 90% of retail shareholders who have voted have voted in favor of both resolutions," apparently including the one on his pay.
Bruce Goldfarb, president of Okapi Partners, a proxy solicitor not involved in this vote, said 90% support from retail investors would be "about normal" since the category generally favors management. But such investors usually don't vote, posing a challenge for Tesla.
"Retail shareholders are wildly apathetic even if they’re supportive," Goldfarb said. Mom-and-pop investors only voted about 30% of their shares in 2023, according to vote-processing company Broadridge, compared to 80% for institutional investors.
Basically, this could end up a lot closer than Musk ever imagined it would. And even if blue-check, paying X subscribers are all-in on Musk's leadership, X is not real life; they may end up a vocal minority here. Or Musk will sail forward and then have to deliver on his big AI push at Tesla. Legitimately, I have no idea how things will go for him this week.
Expect more on this as it happens at InsideEVs.
60%: Gigafactory Slowdown
Meanwhile, this year has proven to be an extremely weird one on the EV growth front. More and more, what we're seeing in the U.S. especially is that non-Tesla EV sales are rising, but the biggest electric automaker's sales are down, dragging the market down in aggregate with it. It's probably fair to say EV sales are quite a bit slower in Europe, however.
Hence, automakers are rethinking their plans to go all-electric. That has profoundly dangerous implications for our climate, but car companies are in the profit business, not the environmental one.
Today, The Information reports that as part of this sales growth slowdown, several automakers and outside firms are hitting pause on planned battery "gigafactories" in Europe and North America:
Mercedes-Benz and Stellantis last week froze construction of two European battery gigafactories they were building through a joint venture. The companies want to take a fresh look at the plants in hopes of reducing the price of their electric vehicles, driven in large part by the cost of the batteries, the most expensive component in an EV. If they can reduce the cost of their batteries, perhaps they can sell more EVs and better compete with Chinese rivals.
[...] In the battery and EV investor mania of 2020 and 2021, current and would-be battery manufacturers seem to have considerably overestimated consumer demand for EVs, at least through 2030. There is no way of knowing how much excess capacity there is in Western plans, but we have categorized 37 of the gigafactories in our database—more than half—as either uncertain or unlikely to be completed.
Emphasis theirs, as well as mine. But as The Information reports, these companies may have put their eggs in the wrong battery-chemistry basket:
This is because many of the battery makers and their auto company partners seem to have chosen the wrong type of battery to manufacture: Most plan to make nickel-manganese-cobalt batteries, which have high energy density and deliver the greatest potential driving range but are relatively expensive and subject to more potential supply bottlenecks—for nickel, lithium and cobalt. Chinese companies in contrast have placed their bets largely on typically cheaper lithium-iron-phosphate batteries, which face a single potential bottleneck—for lithium. Today, most Teslas and Chinese EVs use LFP, which is a major reason why their cars are cheaper than Western models.
Slowing down on battery plant growth and hoping that tariffs alone will head off an increasingly powerful Chinese auto industry seems like a questionable move in the long-term.
90%: More Employees Sound Off About Fisker's Fate
That car you see above is the Fisker Pear, an EV that was meant to cost about $30,000 before any incentives. It's fair to say it's unlikely to see the light of day now, as Fisker's future seems more in doubt than ever. The company has been roiled by layoffs, customer service issues, a halt to the production of its Ocean SUV and more challenges.
A new report from veteran journalist Nicole Wakelin in CarBuzz features claims from more ex-employees, and they track with what we've been reporting as well. One detail I had not seen before: in April, a Fisker executive warned the remaining employees they could all be laid off around June 28 if the company doesn't secure more cash or a new buyer.
It's tough to say if that's still the case; this letter is now almost two months old and it was reportedly provided by an employee who was cut in May. But June 28 is rapidly coming up and there's no news yet of Fisker getting any sort of lifeline.
100%: If Musk Leaves, Who Should Lead Tesla?
If Musk is really poised to move on from Tesla if he doesn't get what he wants—an outcome I still think is far from certain—the fallout would be immense. It would likely tank the value of the company's stock price, much of which hinges on Musk and his team eventually "solving" the question of fully autonomous driving.
But if he does move on, it'd hardly be the end of Tesla. Who do you think should take the reins if a post-Musk future is really in the cards?
Contact the author: patrick.george@insideevs.com
