Is Musk Preparing To Leave Tesla?
I'm worried about Tesla.
While Musk might not have started Tesla, he is definitely the face of Tesla. He is single-handedly responsible for the entire marketing department of the company. His risk-happy mentality is also why the company has leapfrogged the entire automotive industry, leaving them all grappling to catch up. What’s more, the hype Elon generates around Tesla is half the reason its stock is worth so much. People believe the company is going places! However, Musk’s recent moves suggest he is gearing up to leave his most valuable company. Such a move could destroy the EV giant from within. But will Musk really jump ship?
Let’s start with why Musk might want to step away from Tesla.
It starts with AI. You see, since Tesla started, it was a manufacturing company. Despite what you might think, Tesla has never developed a major breakthrough technology. Instead, Tesla used already existing technology or partnered with technology leaders to make the best and most affordable EVs possible. The only reason Tesla was able to leapfrog an entire industry and make EVs possible is that the automotive industry was massively dragging its feet when it came to electric vehicles. As such, Tesla could make EVs that were miles ahead of anyone else, as they inherently had a head start. As such, Tesla’s share price soared way past what it should be worth as people predicted they would dominate car sales. But, over the past five or so years, the competition has caught up and caused Tesla to miss sales targets and significantly decrease their share price.
Musk can’t let Tesla’s share price slump. The solution was the “Model 2”, an affordable $25,000 EV. This would open Tesla up to a larger market, boosting sales dramatically and pushing the share price back up. Sadly, Tesla is late to the game here, as there are already a myriad of EVs with the same specs at that price. As such, it almost certainly won’t sell anywhere near the volumes Musk is promising. Basically, manufacturing alone couldn’t keep Tesla on top. Luckily, over the past few years, Musk has pushed Tesla’s self-driving AI.
Hedge fund managers, such as Cathie Wood, have claimed that Tesla’s self-driving AI could make Tesla worth well over a trillion dollars. Musk himself has even claimed that their FSD self-driving feature will be worth $100,000 per vehicle in the next few years. In fact, much of Tesla’s recent share price growth is down to investors speculating Tesla will lead the autonomous vehicle market. As such, Musk found a way to rescue Tesla’s value by changing direction and becoming an AI company.
So, Musk effectively cancelled the Model 2, and Tesla will instead develop an autonomous robotaxi based on the same platform. He even disbanded the supercharger team, fired the battery development head, and pulled the plug on gigacasting development. Why? Well, it seems Musk is firing crucial talent and kneecapping these previously foundational parts of its business to ease up the funds to bet the farm on self-driving.
Okay, so why would that mean he wants to step away?
Well, there are two reasons. Firstly, Musk has a unique approach to self-driving AI development. Back in 2021, he switched Tesla’s system to vision-only, getting rid of the radar and ultrasonic sensors, meaning the AI could only use video feeds to understand the world around it. Tesla engineers warned Musk that this would make the system less safe and make it far more difficult to develop. Musk ignored them and pressed on. These engineers then told their story to the press, revealing that just as they warned, FSD was less safe because of the switch and that it is still miles away from being a safe finished product. Musk has demonstrated multiple times that he rules his teams with an iron grip, and requires them to follow his vision to the letter. High-level or even mid-level engineers leaking these stories, leading to investor pressure to go a different way, is a dealbreaker for him.
As such, the second reason makes more sense. Musk has threatened to leave Tesla if his $56 billion pay package isn’t approved. He has also threatened to leave Tesla if he doesn’t get roughly 25% control of the company. Musk currently owns 13% of Tesla, and as there is only a single share class, he only has 13% control of the company. That $56 billion would be paid to him in Tesla stocks, raising his stake in the company to only 18%. With context, Musk’s threats here become obvious. Firstly, he claims his AI push will make the company far more wealthy and wants to know that he will be paid for this handsomely. With a stake of around 25%, Musk could sway votes on his pay packages considerably! Such a stake could also protect his damaging approach to self-driving AI development from shareholder backlash. Shareholder backlash is already a serious problem, with class action lawsuits from owners and shareholders over Tesla’s false claims about their self-driving technology.
Okay, so that’s the reason Musk wants to leave, but where would he leave to?
Well, Musk’s threats weren’t hollow. He claimed that if he leaves Tesla, he will develop his AI technology elsewhere. Musk recently started an AI company, xAI. The startup has raised 6 billion from Sequoia, Andreessen, and Saudi royals. They have also undertaken a massive recruitment push. If Musk were to develop AI outside of Tesla, it would be xAI. It turns out that xAI has actually been poaching Tesla AI engineers and coders, and 12,000 H100 Nvidia GPUs were redirected from Tesla to xAI! These GPUs and workers are crucial for getting FSD working properly, so this is actively harming Tesla’s progress.
Musk has forced it so that Tesla’s future depends entirely on its AI development. So, why is he raising funds, poaching crucial AI workers, and redirecting key AI infrastructure to an entirely different company? It makes very little sense. Surely, this money, talent and technology can all do more within Tesla. Even if they were developing AI products other than FSD, surely, if Tesla were an AI company, other AI products would boost its value. Musk certainly knows this, and that’s why he is pushing Tesla’s AI-powered humanoid robot! Instead, all of his actions make it look like Musk is preparing to jump ship and develop his AI in xAI simply because he can have more control and make more money, at least, more money for himself.
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Sources: BI, NDTV, The Guardian, HRP, The Register, Fortune, Will Lockett, Planet Earth & Beyond, Futurism