Tesla is in serious trouble

On April 5, Reuters broke some major Tesla news: the $25,000 car that the company had supposedly been staking its future on has been cancelled. Instead, CEO Elon Musk wants to bet the company on his fantasy of creating a robotaxi, despite there being no end in sight for the problems with its self-driving software.

The news organization cited Tesla employees who said they attended a meeting in late February where Musk made the announcement. In Walter Isaacson’s biography of Musk published last year, he described Musk’s initial opposition to building the more affordable model even though it had been part of his strategy for company since his first “master plan” in 2006. Isaacson described a meeting in August 2022 where Musk declared, “No mirrors, no pedals, no steering wheel. This is me taking responsibility for this decision.” The robotaxi was the focus; the low-cost Tesla wasn’t happening.

However, in September lead designer Franz von Holzhausen and a few others convinced Musk to allow them to work on both projects as long as they could use the same vehicle platform. They told Musk a $25,000 model was essential if they hoped to meet the company’s growth targets. Isaacson describes Musk being in a bad mood after the meeting, but accepting the new direction. That clearly didn’t last.

Tesla is in a tough place. After years where it was considered the shining star of the nascent electric vehicle (EV) industry, if not the wider automotive industry, its prospects have begun to dim. With sales slowing, competition mounting, and investors losing interest in Musk’s fantastical promises that never come true, the Tesla story is poised for a shift and its share price could be in for a significant correction. It remains to be seen whether the board will continue to let Musk’s increasingly erratic reign continue.