It’s been quite a week, even by Elon Musk’s fickle standards.
On Sunday, it was as if the maverick billionaire of Tesla, SpaceX and social media platform X had pulled off an unlikely coup when he made a surprise visit to Beijing and met with Li Qiang, China’s prime minister and number two in the political hierarchy. It looked like .
Hours later, a Chinese industry group revealed that Tesla’s electric vehicles were included in a list of more than 70 vehicles tested for data security compliance. Later, officials close to Baidu, China’s Google, confirmed a partnership with Tesla that would give Musk’s company access to the Chinese group’s navigation, mapping and data systems.
By sheer force of his own personality, Musk smoothed the path for semi-autonomous driving technology, called FSD or “Full Self-Driving,” to be rolled out to the 1.6 million Tesla cars already on China’s roads. It looked like it did. Musk believes this technology will be central to the future of the EV market, saying, “Everything else is like a variation of a horse-drawn carriage.”
As Musk’s private jet took off from the Chinese capital on Monday afternoon, markets approved. Tesla shares soared 15%, with analysts declaring a “tipping point” for the company. This provided some relief to the stock, which at one point fell more than 40% in 2024 and was the worst performer in the S&P 500.
But drama was brewing at Tesla’s headquarters in Austin, Texas. An internal memo arrived in executives’ inboxes Monday night. Mr. Musk announced that he would dismantle the division that runs Tesla’s electric vehicle “Supercharger” network, fire two senior executives and lay off hundreds of staff, including the company’s entire public policy department. A few days later, the next HR manager resigned.
Mr. Musk warned, swinging his axe. “We hope these actions make it clear that we need to go all out when it comes to headcount and cost reductions. . . . Some executives are taking this seriously, but… Most people still don’t.”
Musk is notorious for his uncompromising and unconventional management style. After acquiring Twitter (now rebranded to X) for $44 billion in 2022, Musk forced all employees to sign a pledge to go “hardcore” or quit.
But the scale and frankness of Tesla’s latest shake-up puts the 52-year-old’s leadership style and ability to personally oversee an empire of self-driving cars, rockets, satellites and social networks used by more than 500 million people There has been renewed scrutiny of the issue. people.
The decision, coupled with Tesla’s radical strategic shift toward self-driving, artificial intelligence and robotics, has upset staff, customers, rivals and some analysts and investors.
This week’s turmoil comes as Tesla faces its biggest challenge since EVs went mainstream: a fierce price war with Chinese rivals and an escalating geopolitical rivalry between China and the powers that be in Washington. It was also the time.
As Mr. Musk forges closer ties with Xi Jinping’s government, including on data transfers, he risks a backlash from Washington, which is increasingly concerned about China and its technological capabilities. Just last month, Congress passed a bill aimed at forcing video app TikTok to separate from Chinese owner ByteDance or face a nationwide ban.
“He’s polarizing, and his positions are alienating some core voters, including in California,” said Bill Russo, former president of Chrysler in China and founder of AutoMobility, a consultancy in Shanghai. To tell. “Now, can he thread the needle and act in a way that counters the geopolitical bias against China that exists in the West in a very polarized world?”
the last few years Over the years, Musk’s opinions and actions don’t seem to deter people who might someday buy his car. There are signs that this situation is starting to end.
Already, U.S. dealers are warning that potential Tesla drivers are deciding to buy rival electric models in protest of Mr. Musk’s provocative political comments about the X.
This week’s decision to lay off nearly the entire 500-person Supercharger team with no notice and little public explanation raised further questions from investors.
With 50,000 sites worldwide and 15,000 sites in North America, the charging network had become an industry standard, forcing competitors to take advantage of deals to use it. Musk said expansion has slowed and many potential sites have been scrapped.
Critics have accused the Twitter acquisition of distracting Musk.
Tesla’s finances and sales have deteriorated since he began buying large amounts of Twitter stock in early 2022 and reached an agreement to take it private in October of the same year. The company’s market capitalization has nearly halved from $1.2 trillion in November 2021 to $575 billion.
This year, as the focus returned to Tesla, Mr. Musk took a drastic step.
In April, he announced 14,000 layoffs, or about 10% of the total workforce, ahead of a 9% decline in first-quarter sales, and said that compared to 2023, “vehicle growth rate may become significantly lower.”
Musk then shelved plans to develop a new, more affordable $25,000 model and instead announced plans to launch a lower-priced version of the current model, resourcing the company as part of a fundamental rebranding. transferred to a new self-driving “robotaxis”. The mission is “Robots and AI”.
Musk predicts that tens of millions of self-driving cars will be “a combination of Airbnb and Uber.” During idle time, the vehicle’s excess processing power is networked to train AI models.
Investors and the company’s supporters are divided over the wisdom of its recent decisions and change in focus, especially since Tesla still derives 82% of its revenue from car sales.
“Mr. Musk is firing people who are critical to Tesla’s success because of a false belief system,” said a longtime Tesla shareholder at asset management firm Gerber Kawasaki who has emerged as a prominent critic of Mr. Musk. says Ross Gerber. “Tesla is not selling cars because of him. His response is to blindly eliminate costs rather than address the real problem.”
Supercharging “has been the fastest growing and profitable segment. Charging monopoly creates great value for Tesla,” Gerber added. “That’s a terrible setback.”
James Anderson, a managing partner at Lingotto Investment Management, which owns Tesla stock, has a more pragmatic view of Musk’s actions.
“That approach has always been idiosyncratic and extreme. . . . It’s strange to suddenly expect decision-making and staffing to become normal,” Anderson says. “If self-driving is the driver, not volume, [of growth] Then you need people with different visions. Is this difficult, unpleasant, and extremely demanding? For sure. “
Amid growing concerns Musk’s visit to Beijing this week shows he is choosing to bet on China, especially as EV demand has been slower than expected, especially in the United States and Europe. But Tesla’s operations in the world’s largest auto market, which increasingly relies on data collection to deliver advanced driving systems, are facing new questions over national security.
Despite the positive stock price reaction on Monday, there was no statement from Tesla, Baidu or the government. Analysts remain in the dark about the details of Tesla’s plans to bring its semi-autonomous driving platform to China and how it will be handled by the country’s security-conscious regulators.
China is Tesla’s largest market outside the United States, a key part of its electric vehicle supply chain, and an increasingly important export hub. In 2018, Musk signed a deal with then-Shanghai Communist Party leader Li Qiang to build a multibillion-dollar electric vehicle factory. This investment is said to have ushered in the rapid growth of China’s EV industry.
Since then, China’s EV market has developed rapidly. Tesla’s share of new EV sales in the region is 7.5%, compared to 33% for Warren Buffett-backed BYD. The Chinese government is also overhauling its data governance and anti-espionage laws, creating uncertainty over how companies such as Tesla can move data from cars to and from the United States.
Bernstein analysts say that under the new partnership, Baidu will become the “gatekeeper” for the data, overseeing its backup and transfer to Tesla’s Shanghai data center and possibly overseas. “It’s our best guess.”
Jeff Chan, a Hong Kong analyst at Citigroup, believes Tesla could build a “firewall” between its U.S. and Chinese operations. This means that the core AI training process will take place in the United States. The company’s China team will use data from Chinese users to “fine-tune” the system, without exporting data from China to the United States.
Chinese data security lawyers say that while the Chinese government is prioritizing EVs, Tesla cars are equipped with more cameras rather than the sensors used by other EV manufacturers, making them more vulnerable to military, government, and other uses. It is still unclear whether the vehicles will be allowed to drive near sensitive national facilities.
Sam Sachs, an expert on global cyber policy at the Paul Tsai China Center at Yale Law School, said there is a rift between Beijing’s security-focused and pro-growth regulators over whether data should be “locked down.” He said there had been “latent” tensions for several years. ” or monetized.
“The Xi administration is absolutely prioritizing security,” she says, but there remains a conflict between economic and security goals. “Each company will have to get through this on its own.”
Mr. Musk still faces a complex geopolitical balancing act.
Relations between Tesla and India also suddenly became strained. Musk’s visit to China appeared to be an implicit show of contempt for Prime Minister Narendra Modi. On April 10, Musk promised to visit India, fueling expectations for an announcement to build a $3 billion electric car factory, but backed out 10 days later, citing “very heavy obligations to Tesla.” . Nine days later, he appeared in Beijing.
In the long term, experts also fear further conflicts between his commercial interests in China and Beijing’s heavy-handed restrictions on free speech and criticism of the government. U.S. critics say he has double standards toward China and its politics.
While in China, Musk used X, even though the platform was banned in the country. Audio clip of comedian Jerry Seinfeld lamenting the negative impact of “far left” and “PC crap” on TV comedy shared. “Make comedy legal again!” Musk wrote, apparently unaware of the recent crackdown on the art form by his hosts in Beijing.
Yaqiu Wang, research director for China at Freedom House, a US-based advocacy group, said Musk’s “coddling” with China’s top leadership is critical given that Chinese people are facing detention. said it would be a “total mockery” of Musk, who is seen as a champion of free speech. To use X.
“The Chinese Communist Party is very concerned about what it says about X magazine and has a track record of leveraging foreign companies’ market access to China for political purposes,” she says. . “We should all be very concerned.”
Additional reporting by Harriet Agnew, Arjun Neil Alim and Nian Liu
