July 1 has the unfortunate distinction of being the 16th birthday of the world’s most controversial car maker, Tesla Motors.
Given the insanity of Elon Musk, it’s a wonder Tesla made it this far. Or rather, perhaps it’s because of the insanity of Elon Musk that Tesla is still around.
Granted, it isn’t easy launching a car company. Yet Elon Musk has run Tesla in the most bizarre of fashions. Tesla’s performance has been marked by failures, missed delivery targets, overpromised and under-delivered advancements, inefficient production and deliveries, mechanical problems, exploding cars, auto-drive systems that kill people, and a cash-flow burn that runs into the billions.
It’s that cash burn that should concern everyone. Elon Musk still manages to lose tons of money despite the fact that he’s a rent-seeker and his customers were subsidized in their purchases.
Yet birthday boy Elon Musk has a habit of just papering over everything that goes wrong with the company.
Hedge fund manager David Einhorn has pointed out parallels between Tesla and Lehman Brothers prior to the investment bank’s 2008 collapse:
“There are many parallels to TSLA. In 2013, TSLA was on the brink of failure as customers who had paid deposits weren’t taking delivery of the Model S. TSLA’s cash reserves fell to a dangerously low level and CEO Elon Musk secretly and desperately tried to sell the company to Google. Rather than communicating truth to shareholders, Mr. Musk bluffed his way through the crisis. There were no regulatory, legal or market consequences for failing to own up to reality. The business survived, and Mr. Musk was celebrated for his successful bluffing.”
He certainly was, and still is.
Generally speaking, a company that sells more and more product starts to make more and more money. That’s not the case with Tesla. Compare the charts of sales vs. profit:
This is a classic example of a poorly-run company.
A company that is well run, even a disruptive startup like Tesla, would preach patience. It takes time and skill to design a car, manufacture it, and refine it to the point where it is reliable.
Elon Musk has been so busy making bold promises that he was forced into rushing cars out more quickly than was reasonable – just to prove he could do it.
Contrast the erratic nature of deliveries with that of an established manufacturer, and you see the wide gulf between them.
So even as Tesla celebrates its birthday and Elon Musk admits that he expects Tesla to fail, the CEO must continue to crack the whip on his employees, miss its delivery targets, and figure out how to keep the con going for a little while longer.