Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Has dabbling in politics ever proved so costly? Between its peak last December and its dismal first-quarter sales and earnings report last week, Tesla lost roughly $800bn in market value. That knocked a cool $100bn or so off the wealth of its co-founder and CEO, Elon Musk. The shares have since bounced a little, in part as investors have cheered Musk’s promise to step back from wielding a chainsaw in US government departments as head of Donald Trump’s so-called Department of Government Efficiency, and spend more time running the electric vehicle maker. But repairing the damage to Tesla will require more than just a slightly less distracted boss.
Note that Musk didn’t promise to devote all his time to Tesla and business. He said he would still “spend a day or two” each week on “government matters”. Most boards and investors would still consider that a major distraction for a CEO, especially one overseeing about half a dozen companies at the same time. They might quietly accede if proximity to power delivered useful influence. Yet while the Trump administration did on Thursday move to loosen rules on self-driving vehicles, Musk has been unable to restrain Trump’s determination to roll back other pro-EV policies or his damaging tariff war.
Nor did the Maga convert commit to loosening the broader embrace of rightwing politics that, along with his Doge activities, has sparked consumer boycotts and protests at showrooms. Within hours of Tesla’s earnings call, Musk on his X network was reposting content by Britain’s jailed far-right activist Tommy Robinson and rising poll numbers for Germany’s AfD.
The reality, though, is that Tesla was ailing even before Musk went Maga. Its global auto sales in 2024 were slightly down from 2023. An expanding chunk of its profit was coming from selling regulatory carbon credits to other automakers rather than selling cars. Its ageing product line-up was no longer exciting buyers. Tesla has been too slow to introduce lower-priced models. And it has allowed Chinese rivals such as BYD to gain the edge in innovation. Chinese consumers greeted the launch of Tesla’s “full self-driving” system there in February with a shrug; local rivals already offered similar wizardry more cheaply.
Some investors suspect the restless Musk was already growing bored of running a car company, his eye on the next big thing. Tesla insisted last week that plans to begin producing more affordable models by June were on track, alongside plans to launch its driverless robotaxi service in Austin. Musk breezily averred that Tesla was on course to be the most valuable company in history, producing fleets of “Cybercabs” and Optimus humanoid robots. Yet even the recent halving of Tesla’s value has only left its shares roughly where they were when Trump was re-elected. Apply anything close to a “normal” auto company multiple and it is clear that vast amounts of its value are still a bet on Musk’s vision.
The Tesla chief’s record suggests that if anyone can realise this vision, it is him. But doing so will surely require his undivided attention, not simultaneously hanging out at the White House and Mar-a-Lago, X-ing at all hours, and livestreaming with rightwing politicos. If Musk is not prepared to step back from those activities, he should appoint a CEO who can lead Tesla undistracted. Tesla would benefit, too, from becoming a more normal company in governance terms. The Delaware court of chancery, ruling last year on Musk’s vast remuneration package, highlighted many board members’ close ties to the CEO.
Musk is already assured of a place in the pantheon of global business pioneers. But he would be doing a favour to his investors and customers, and arguably everyone else, if he returned all of his focus to what he’s best at: being a visionary entrepreneur.
