The Problem With Tesla & SpaceX

And how Musk plans to "fix" things.

Photo by nader saremi on Unsplash

When it comes to Elon Musk, it’s always worth asking “Why?” He may try to paint himself out as a genius but he is far from that, as the past few years and his rotating list of scandals have beautifully demonstrated. What Musk has succeeded at through sheer pig-headed trial and error is sleight of hand. The technological leaps he supposedly “spearheads” are actually part of the overpromised con job that is him giving his overworked and underpaid engineers head-splitting migraines. So, when I found out that Musk had started shuffling large sums of cash throughout his empire, I had to ask, “Why?” And, I quickly realised, he is up to his usual shady shenanigans.

Everything begins with Tesla and SpaceX because, as the title suggests, they aren’t doing as well as you’d think.

Tesla, a company whose entire identity, purpose, value and set-up are based on massive growth, has been stagnant for years now. On the 19th of June 2020, Tesla shares sold for $335 (adjusted for stock splits), but on the 22nd of July 2025, they are only worth $328. Sure, the stock has gone up and down drastically during that time, but that is just volatility. Averaged out, Tesla has experienced zero growth for half a decade now.

Meanwhile, profits and sales numbers have dwindled. Tesla currently has a profit margin of just over 2%, and that is only thanks to regulatory credits, without which they would be actively losing money — a far cry from the higher than 15% profit margins Tesla experienced at the beginning of the decade. Likewise, global quarterly sales have gone down by 86.2 million units since 2023. Meanwhile, the EV market has started to boom, and Tesla’s major competition has posted skyrocketing EV sales growth and growing profit margins. It’s not hard to understand why. Several manufacturers are now leapfrogging Tesla for technology, price and specs.

Fortunately, Musk had a magical solution… Full Self Driving (FSD). None of these slow financial failures would matter because all Teslas would be able to drive themselves with safety margins higher than a human driver as soon as next year! The only thing is, Musk has been repeating this hollow promise for nearly a decade, and it has yet to become true.

Third-party testing of the most current version of FSD revealed that it required intervention every 31 miles. In other words, Tesla’s FSD is 99.87% less safe than Musk has claimed. And the most recent Robotaxi rollout demonstrated this fact, as the handful of cars involved have been repeatedly spotted driving illegally. But FSD isn’t really a solution for Tesla anyway. HSBC analysts found that, even if FSD somehow magically perfects itself to align with Musk’s claims, it would take at least eight years before these robotaxis are even close to profitable. In fact, Musk was already warned of this, as his own engineers tried to persuade him to focus on cheaper EVs and not self-driving cars, as they are essentially impossible to profit from.

So, Tesla is a growth company with no growth, an attempt to grow that was doomed from the beginning, and massively declining business fundamentals.

And SpaceX is in the exact same situation.

In 2024, there were 134 Falcon 9 launches. That is a gigantic 515% increase from the 26 launches SpaceX completed in 2020! But this is a slight manipulation, as 103 of the launches in 2024 and 14 of the launches in 2020 were for SpaceX’s Starlink. Starlink is almost certainly not profitable — and thanks to competitors like OneWeb, Kepler and EUTELSAT, it likely never will be — so SpaceX is probably losing money for the majority of its flights. As such, SpaceX has only increased its paid-for launches by 250%, and the profit from this increase is mostly going to Starlink expansion. But the space launch market is small, and outside of Starlink launches, isn’t otherwise growing, so SpaceX likely can’t increase its market share very far beyond this point.

Starship was supposed to solve this. Cheaper and more regular flights would enable new space infrastructure, celestial missions and space tourism, dramatically expanding the market and soaking up all the new customers. That is why SpaceX has likely spent close to $10 billion on Starship development, the vast majority of which has come from big investors and federal grants. Yet, it’s still years behind schedule and currently can’t deliver even a fraction of its payload to orbit without exploding, let alone be fully reusable. But, as I have covered numerous times (read more here), this issue is almost impossible to solve, as it is the core concept that is faulty.

So, SpaceX’s growth is actually much smaller than it seems. Starlink, SpaceX’s big moneymaker, isn’t making any money, and Starship, their bid to grow and dominate the space launch market, is an unprecedented failure that might never actually work, leaving them with a $10 billion debt.

But, have no fear, Musk has a plan to rescue both SpaceX and Tesla from their downward spirals. Both will invest billions of dollars into his racist Nazi chatbot, Grok!

As part of a $10 billion funding round, SpaceX will pile a whopping $2 billion into Musk’s xAI, and Tesla is expected to invest a colossal $5 billion. The SpaceX investment is a done deal, given that it is provided by a private company completely under Musk’s control. Regarding Tesla, Musk has said he will allow the shareholders to vote. But, upon announcing Tesla’s potential xAI investment, its stock price went up, so that deal is also more than likely going ahead.

I need to give some context here: $5 billion would be enough for Tesla to develop a new EV, which is something they desperately need. Likewise, $2 billion is enough to pay for a year’s worth of Starship launches, and despite SpaceX’s investment in xAI, the Starship development budget is beginning to run dry. Starship also requires years of further development before it can enter operations. So, both SpaceX and Tesla are making a serious sacrifice here to pile money into xAI.

Despite this, Musk fans are saying this investment makes sense. They point to SpaceX and Tesla using AI to optimise designs (which is potentially why FSD keeps crashing and Starship keeps exploding!), that Tesla intends to integrate Grok into its operating system, and Starlink already uses Grok for automated customer service. However, design optimisation AIs are over a decade old now and are far simpler, cheaper and not really related at all to LLMs like Grok. Naturally, these AIs are better utilised as in-house operations. Likewise, companies that have integrated the far more capable OpenAI models into their operating systems and customer service have been ridiculed for how bad these AIs are at actually doing their job. How is using an AI that swears and makes racist, Nazi comments going to be any better?

As a business investment, it makes no sense either. Generative AI companies are famously unprofitable. OpenAI, the largest one by far, is set to post a $14 billion loss next year, and its current plans would push it towards post-annual losses of more than $100 billion by the end of the decade. xAI, like all other smaller generative AI companies, hasn’t got a hope in hell of competing with OpenAI or getting anywhere close to profitability. So Tesla and SpaceX will almost certainly never get a return on this $7 billion.

In other words, Musk’s solution isn’t really a solution at all…

But why is he doing this?

Well, SpaceX and Tesla are stagnating, with Musk’s grand vapourware plans for growth failing to materialise. This can’t satisfy his ever-growing greed. Not only that, but the entirety of his wealth is based on investors believing he can create this massive growth. As soon as that illusion dissipates, Tesla’s and SpaceX’s value will plummet, and Musk will lose the majority of his wealth and influence.

However, the generative AI industry doesn’t have these issues. A generative AI company’s value is totally uncoupled from its results and products. It’s all hype, zero trousers. The pressure for Musk to deliver on his monumental overpromises is gone. Likewise, free market forces of supply and customer demand have little impact on this industry. It’s another dot-com bubble, perfectly designed for Musk’s grift.

With all of this in mind, I can only think of one reason why Musk is shuttling billions of dollars into this singular corner of his empire when, in reality, he doesn’t have to, as this investment could have come from outside his circle. Musk knows SpaceX and Tesla are a dead end, so he is transferring money and resources into yet another scam to keep a part of his empire alive. Problem solved — at least for Musk.

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Sources: Futurism, Applying AI, CNBC, Will Lockett, Will Lockett, Will Lockett, Will Lockett, Will Lockett, Will Lockett, Will Lockett, Statista, NSF, Macrotrends, Bloomberg