Business is down, and the CEO is busy with politics, but Tesla cannot replace the CEO because the values, beliefs, and technological capabilities are closely tied to Musk.
As investors are increasingly concerned about falling sales and profits while CEO Elon Musk is constantly absent due to being busy with politics, Tesla's board of directors spoke out to defend the company on May 1.
Chairwoman Robyn Denholm said they have "great confidence" in Musk to execute the "promising growth plan ahead". The response came after the Wall Street Journal reported that Tesla's board had considered finding a CEO to replace Musk, something Denholm denied.
The latest development shows the unique dilemma Tesla's board of directors is facing: managing a CEO who runs five companies and has recently focused mainly on advising the Republican US President, something that has upset many of Tesla's left-leaning customers.
In the first quarter, the US electric carmaker's sales plummeted to a nearly three-year low, with 336,681 vehicles sold globally compared to 386,810 in the same period in 2024. Tesla's market value has evaporated about 45% since mid-December last year. Previously, the company's shares had peaked after Mr. Trump's election victory, when investors expected Musk's close relationship with the White House to benefit the electric carmaker.
However, in the first quarter of this year, Tesla's revenue fell nearly 20%, and net profit plunged 71%. "There's no question that the brand crisis is hurting Tesla," said Dan Ives, an analyst at Wedbush Securities. He also called the first-quarter sales "disastrous."
According to new figures released on May 1, the company's sales continued to decline sharply in many markets last month. Sales in France fell 59.4% year-on-year to 863 vehicles, according to the French Automobile Industry Association (PFA). This decline is significantly lower than the 36% decline in March. Since the beginning of the year, Tesla's sales in France have fallen 43.9%. In Denmark, according to data from Mobility Denmark, Tesla's sales in April plunged 67.2% to 180 vehicles, after falling 65.6% in the previous month.
In this situation, Tesla needs to grow again as soon as possible, and a new wind from a CEO to replace Elon Musk has been thought of or speculated by some people. However, according to many analysts, finding a CEO to replace Musk is almost impossible.
Reuters assessed that there are few companies whose fate depends as much on the image of the CEO as Tesla. Replacing Musk is seen as a huge risk, according to investors, analysts, and three people familiar with the matter. An estimated three-quarters of Tesla’s extraordinary market value, which far exceeds its current earnings, is due to the autonomous driving and humanoid robotics technologies that Musk has promised for years but has yet to deliver.
Tesla’s backers still see Musk as the only genius who can deliver that future, despite growing competition, especially from China, where manufacturers like BYD have surpassed Tesla in sales.
Zacks Investment Management portfolio manager Brian Mulberry, a Tesla investor, said replacing Musk would be extremely difficult. The “incredibly complex” challenge would require someone with the capacity to fill the financial void left by Musk. It is about maintaining profitability in the struggling electric car business while delivering on the long-held promise of a “network of autonomous taxis.”
Any successor will have to contend with Musk, who remains Tesla’s largest shareholder, with a 13% stake. Over the past year, the electric carmaker’s leadership team has been thinned out as Musk has shifted his focus away from becoming an “electric car giant” to autonomous taxis, robotics, and artificial intelligence.
Senior executives have resisted a sharp shift away from driverless cars, according to people familiar with the matter. Some have raised concerns with the board, but the board has sided with Musk. The company currently has no internal leader capable of replacing Musk, according to Gary Black at Future Fund. “We don’t see anyone internally with the skills, the technical skills, the strategy, and the execution,” he said. Future Fund is also an investor in Tesla.
James McRitchie, a private Tesla investor, acknowledged the risk of replacing Musk. "The stock price is largely tied to the love of Elon and the belief that robots will do everything for us," he said. He compared Musk to legendary former CEO Jack Welch of General Electric, who was once considered a "god" by investors. "When he left, it was like a tower collapsed. I think Tesla is the same way," he said.
On a scale of 10 for difficulty, replacing Musk is an "8 or 9," according to Brian Mulberry of Zacks Investment Management. In addition, this expert said that the new CEO must be someone "who has his own character and is not overshadowed by Musk."More bluntly, Gene Munster, an expert at the hedge fund Deepwater Asset Management, said replacing Musk was essentially impossible.
Reuters cited sources as saying that some internal Tesla personnel have suggested to Musk for years that he hire a CEO to manage the day-to-day operations, while he remains in a public image role. This is similar to how his other companies are run, such as Gwynne Shotwell, who serves as president and COO of SpaceX.
However, Musk has steadfastly refused to do the same at Tesla. In an online meeting on April 22 to explain the disastrous business results, CEO Elon Musk announced that he would return to direct management of the business. Tesla has gone through many crises over the years, even close to death many times. But this is not the case. We are not on the brink of collapse, not even close," he affirmed.
Brian Mulberry believes the American electric car company can still succeed with or without Musk. Tesla has a great lineup of electric vehicles, including autonomous taxis and autonomous driving technology. Now it's just a matter of management to complete it. Do you really need another wave of innovation, or do you just need to execute it properly?" he commented.
(according to Reuters)