Encore: Tesla vs Detroit | Appetite for Destruction | 4

0:00This series originally aired in 2022.

0:09A note to listeners, this episode contains adult content and language. It's February 2015 at Tesla's corporate headquarters in Palo Alto, California. A Tesla communications manager looks up from his laptop to see a colleague at the door. Oh, hey, you want to order some lunch? I was thinking Chinese. I don't want to even think about Chinese food right now. You've got to learn to separate food and business. Come on, have you seen the numbers? We're getting hammered by Chinese EVs and hybrids. We only sold 3 ,500 cars there last year. That's way below what Elon projected. And on top of that, we lost Wu.

0:49Tesla lured Veronica Wu away from Apple to lead Tesla's expansion. As company president in China, she wanted Tesla to partner with other car dealerships. Musk wasn't having it. After only nine months on the job, Wu left the company. That was a gut punch, but the buyers do love their Teslas and are super active on social media. So what? That love's going to disappear if they can't charge their electric cars. Nearly 75 % of people in China's urban areas live in apartments where most can't charge their cars. And some owners say shared garage charging poses a fire hazard. Musk promised 10 months ago that he would have a network of hundreds of high-speed supercharging stations soon.

1:36Right now, there are only 23, making potential customers nervous about buying. And we have another problem. What's that? The Model S is pricey, which wealthy Chinese people love, but it's like a foot shorter than most luxury SUVs. You know, it's go big or go home in that market. The Model X will be in China next year, and it's tall, but just like the Model S, it's going to need a lot more supercharging stations. The Chinese government has a five-year plan to create charging stations for 5 million EVs by 2020. Musk has to make good on his promise of a free supercharger network. If he doesn't, he risks being left in the dust.

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3:59From Wondery, I'm David Brown, and this is Business Wars.

4:27In our last episode, Tesla finessed a technological edge by partnering with Panasonic to make the Gigafactory, a behemoth manufacturing facility that can produce millions of batteries to fill Tesla's mass production needs, a necessity if it's to dominate the threat from Motor City EVs. But now, as Tesla is poised to own the American EV market, new nightmares are on the horizon. This is Episode 4, Appetite for Destruction.

5:05It's October 2015 in Detroit. Two auto industry reporters are grabbing lunch at the popular Chef Greg's Soul in the Wall. Hey, glad you could make it. I ordered you a Boogaloo Wonderland burger. Nice. Jesus, traffic's insane. I can hardly wait till someone gets the self-driving car together. Well, then Mary Barra is going to make you a happy man. Next year, Cadillac's going to have autonomous driving. They're calling it Super Cruise. I think they're already testing a self-driving Volt. General Motors CEO Barra has announced plans to make sure the aging company is seen as a player as interest in EVs and self-driving cars mounts.

5:45She's calling for zero crashes, zero emissions, and zero congestion. Can you believe the CEO of GM is saying that? The company whose bread and butter is those gas-sucking trucks the size of freaking tanks? Yeah, they're going to have their work cut out for them, especially going up against the rich geeks. Apple and Google and Uber are all working on self-driving EVs. Yeah, and Mercedes, Audi, and BMW, too. Everybody's got something in the works. Well, if you ask me, Tesla has the edge. Big time. Musk's even blabbing about how owners can upgrade the autopilot software at home. Hell, he's saying that in three years, Teslas won't even have steering wheels.

6:26Tesla's latest software allows a driver to turn on various self-driving features, like lane changing and auto steering, side collision avoidance, and parking. Yeah, but state and federal regulators are saying people have to keep their hands on the wheel, even if they're not controlling anything. And who the hell is liable if there's an accident, the carmaker or the driver? Musk is saying Tesla won't cover accidents. A waiter slides two plates of burgers in front of the men. The reporters pounce on them, quietly contemplating for a moment a future of self-driving cars.

7:06Late October of 2015, at the offices of Consumer Reports magazine in Yonkers, New York, I don't know what's happening in Silicon Valley, but the Model S has taken a dive. It sure is. Growing pains, I guess. An editor and an automotive reviewer are mulling over an article. The magazine's reviews are some of the most respected and influential in the world, and not just for the auto industry. When the Model S debuted in 2012, the magazine gave it the highest rating of any car it had ever reviewed. The endorsement helped boost the fledgling Tesla tremendously, especially in its war with Detroit. We're going to drop our recommendation.

7:48I don't see we have a choice. I mean, we surveyed 1 ,400 Model S owners, and people are complaining about everything from power and charging problems to door handles that don't work. Yeah, I guess it's no fun getting locked out of your$127 ,000 car. You know, if Tesla's going to be a player on the Detroit level, they can't have this kind of thing happening. I'll say one thing. Tesla owners are loyal as hell. In our survey, 97 % of them said they'd buy the same Tesla again. I get it. I'm a Cubs fan. Anyway, most of these cars are still under warranty. Trying to fix this stuff when the warranty expires.

8:28That won't be cheap. Consumer Reports withdraws its recommendation. And that hits Tesla hard. Its stock drops by 10%. And all that's chased by a nasty wave of bad publicity. And more complaints are coming from under its own roof.

8:56January 2016 at the Tesla factory in Fremont, California. The assembly line is humming around the clock. Look, Elon, these people need a break. They're exhausted. It's not sustainable. Elon Musk is walking the factory floor with his deputy head of manufacturing, Josh Ensign. Musk spins around and glares at Ensign. A break? Are you kidding? We need to work faster. If we don't deliver this quarter, our investors will be pissed. We need to be doing 1 ,000 cars a week by June. Ensign looks at Musk in shock. Everyone worked hard last quarter and we were only able to make about 500 cars. Elon, you want to double that?

9:36You're killing the crew. Maybe not killing, but injuries are mounting. Manufacturing quality suffers. Hundreds of Model X SUVs fresh off the assembly lines are idling in the parking lot with unfixed problems. Musk's nerves are shot. He's barely sleeping, working around the clock himself. He stalks the factory floor, micromanaging his people as they rush to assemble the EVs. Ensign is at wit's end. He moves in close to Musk and locks eyes with him. Elon, we need to give people at least a weekend off or we're going to have a mutiny on our hands. Musk glares at him. A weekend off? I could be on a private island with naked supermodels drinking Mai Tais, but guess what?

10:30I'm not. I'm right here on the floor with everybody else busting my ass every day. So don't talk to me about people needing a freaking weekend off. Ensign watches the billionaire stalk off in a huff. He shakes his head, thinking, The boss is lucky this isn't a union shop. In March, Musk announces via Twitter that Tesla is taking pre-orders for the Model 3. Buyers swamp Tesla stores armed with$1 ,000 deposits. Musk and the Tesla staff are blown away. The Model S took months just to chalk up 3 ,000 pre-orders. But the Model 3 orders are already in the hundreds of thousands. The company's CFO predicts a gross revenue of$35 billion.

11:24For the last decade, Musk has been telling anyone who will listen that Tesla will create a long-range, truly affordable EV. And now, with the Model 3, he will make good on his promise for a mass-produced car for average consumers. It has a 200-mile range and a base model price tag of$35 ,000. Musk has been promising it will debut in 2017. But at the end of 2016, in Tesla's home state of California, General Motors beats Musk to the punch. Chevrolet's all-electric Bolt goes on sale in the Golden State, and it begins selling nationally in early 2017. It has a 238-mile range on a single charge, and after incentives, costs about$30 ,000.

12:16It's the culmination of the green vision of former GM executive Bob Lutz that began with the Chevy Volt, now carried on by CEO Mary Barra. The Bolt is Detroit's challenge to the Silicon Valley outfit. Both the Bolt and Model S have a 200-mile range. The Bolt has more cargo space, but the Model S has more curb appeal. But in October 2017, GM announces buyers will have dozens of options by 2023. In fact, the president of GM tells CBS that it's planning an all-electric future. It's not so much if, it's just how fast. Mark Royce is president of General Motors. He says electric cars will no longer be a novelty for the rich.

13:07GM is now betting big on batteries, planning to launch 30 new electric vehicles across a wide range of price points in the next five years. Shortly after GM's announcement, Ford says it'll spend nearly$4.5 billion to add 13 EVs to its green slate in the coming years. Despite all the hype, EVs and hybrids make up only about 1 % of car sales in the U.S. But it's clear the iconic carmakers are taking the once-disruptive EV movement seriously. And maybe hoping to beat Tesla at its own game. And now, the war between Tesla and pretty much every other carmaker has another battlefront. Hands-free autonomous driving.

13:59And that means it's not just going green that has people concerned. People's lives are at stake.

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15:53It's early 2017 at the National Highway Traffic Safety Administration offices in Washington, D.C. All right, so let's go over the basic facts again. A 40-year-old man is driving a Tesla Model S at 74 miles an hour on a two-lane highway in Florida on a Saturday afternoon around 430. Good visibility, right? Right. That's when the semi-trailer crosses the highway. Two investigators are reviewing a tragic crash that occurred in May, a probe that they're about to close. So the truck didn't yield a right-of-way. So the Tesla driver goes under the trailer, takes the top of the car off. The vehicle hits a utility pole and ends up in someone's front yard.

16:36Driver's DOA. The Tesla was equipped with Autopilot, the semi-autonomous cruise control feature. It's the first deadly incident involving a partly self-driving car. So why didn't the guy stop? An autopilot alerted him to keep his hands on the wheel seven times over a 37-minute drive. The software and braking system functioned as they were supposed to. Well, the conclusion we've come to is the truck was white. It blended in with the bright sky. Neither the driver or the autopilot sensor registered it, so the brakes didn't engage. You can't fault Tesla. In the months after the fatal crash, the company issues software upgrades and a function that would disable autopilot if a driver ignores a warning three times.

17:28The last thing Musk needs is bad publicity around autopilot just as the Model 3 is set to debut. But the NHTSA probe clears Tesla. And there's more good news. The federal probe actually finds that the overall crash rate of Tesla cars once autopilots installed dropped 40%. The findings give Tesla a momentous bump on Wall Street. On Monday, April 10th, Tesla sales passed forward to become the country's second most valuable car manufacturer right behind General Motors. On April 16th, six days later, Tesla closes the market day at over$51 billion. Over the years, Musk has been derided for his gonzo antics and hailed for his vision.

18:23However one feels about Elon Musk, this is a momentous occasion. He's taken Tesla from a near-bankrupt company to becoming the most valuable carmaker in the world. It's an unprecedented rise. It was unthinkable only 13 years ago, when Tesla was launched out of a small Silicon Valley office. And still, the company has never had a profitable year. Musk pledges to make half a million cars in 2018. The total for 2016? Just over 76 ,000.

19:06It's February of 2018. Elon Musk is cruising through Palo Alto, California in his Model S, waiting for his CFO to pick up the phone. Hey Elon, you calling from outer space? Musk rolls his eyes. The day before, SpaceX launched Musk's 2010 Tesla Roadster into space with a dummy behind the wheel. The rocket needed a payload to launch into space. Musk said he wanted the silliest thing imaginable. Mission accomplished. Yeah, hey, that's hilarious. Now give me the numbers. Well, getting the bugs out of the Model 3 is proving costly as hell and... Numbers already. We lost three quarters of a billion dollars in the fourth quarter.

19:49Jesus. We've got to wrap up production. People are waiting on the Model 3 and last July I promised we'd be making$20 ,000 a month by December. The EV has close to a half a million pre-orders. Now, over a year after its unveiling, the Model 3 has finally hit the market. But Tesla is still nowhere near getting it into mass production, let alone delivery. Musk activates autopilot and closes his eyes for a second, shaking his head. We're in a deeper hell than I ever anticipated. It's our first time heading into high-volume production, Elon. It's uncharted territory. There are going to be hiccups, but we ramp up production and we'll be in the clear.

20:34That damn well better be what we're going to do. I want to see 5 ,000 cars coming out of the factory every week by summer. We're getting battery delivery glitches figured out at the Gigafactory. That's been the big hurdle. But we're closer every day, and the good news is we're not taking any hits in the market. Investors still believe in Tesla. Well, so do I. If we can send a roadster into space, we can get the Model 3 figured out here on Earth.

21:04As July begins, Musk's goal is met. 5 ,000 Model S sedans roll off the assembly line in a single week. In other good news, Tesla closes a deal to open a factory in China, a move that is crucial to the company's growth and industry standing. But Musk is not in celebration mode. He's worn to the bone, pulled in many directions. He's tweeting obsessively about everything from Tesla news to his inability to sleep. On the other side of the world, a group of young boys in Thailand find themselves in a situation far worse. It's totally unrelated to anything happening at Tesla. But Musk sees a role for himself.

21:54A boys' soccer team gets stuck deep underground in a flooded cave. The Thai Navy SEALs engage in a days-long rescue effort to free the 12 young men. Musk believes that the engineers from SpaceX, the Boring Company, and Tesla can help. Musk tweets that Tesla will create a mini-submarine. The boys are rescued without help from Musk. When a British cave explorer named Vernon Unsworth tells the press he thinks Musk's offer was a publicity stunt, Musk goes ballistic. He takes to Twitter referring to the man as pedo guy, as in pedophile. The backlash is fast and strong. Tesla stock valuation plummets by$2 billion.

22:42Investors publicly wonder if Musk is losing his focus on Tesla. On July 17th, his staff convinces him to apologize. The dark publicity storm fades. But Musk still has production issues with the Model S that are not going away. The factory can't keep up with pre-orders, and new sales are beginning to slow. Once again, Tesla is bleeding money. Musk is desperate. Desperate enough to sell his company. He's thinking, who's big enough to absorb Tesla? He reaches out to Apple CEO Tim Cook, offering Tesla for$60 billion. Musk says Apple wasn't interested, but Cook later told the New York Times that he never took the call.

23:34But Saudi Arabia's sovereign wealth fund smells an opportunity and buys about$2 billion of Tesla's shares. Musk is breathing again. And of course, he can't get on Twitter fast enough. He tells his millions of followers, I'm considering taking Tesla private at$420, funding secured. Tesla's stock explodes. But there's a problem. Before a company makes such an announcement, it's required to give NASDAQ a heads up. Trading is then stopped while the news reaches all potential investors. Missing that step triggers an investigation by the Securities and Exchange Commission. Once again, Musk's tweets land him in hot water.

24:25Two weeks later, Musk withdraws the threat to go private. The SEC filed suit, threatening to remove Musk from his role as CEO. The SEC and Tesla reach a settlement. Musk can stay on as CEO, but he must pay a fine of$20 million, and his future tweets need to be monitored. Musk is far from contrite, but he hands over the money.

24:57It's September 2018. It podcast hosts Joe Rogan's studio in Woodland Hills, California. It's a fence-mending mission, and the smart money might guess this won't go as hoped. Musk is going on this show to try and mitigate the fallout from his recent PR nightmares, the pedo guy comment and his Twitter threats to go private. Musk agrees to appear on the Joe Rogan Experience, which has 11 million listeners, to show he's a level-headed guy. Musk's people are all for it. It's a chance for Musk to relax, flex his quirky charm, and perhaps appear less of a loose cannon. That's not exactly what happens.

25:41At one point, Rogan lights up a large spliff, puffs on it, and hands it to Musk. So is that a joint? Or is it a cigar? It's marijuana inside of tobacco. Okay, so it's like posh, tobacco posh. You never had that? Yeah, I think I tried one once. Come on, man. You probably can't because stockholders, right? I mean, it's legal, right? Totally legal. Okay. How does that work? Do people get upset at you if you do certain things? This was definitely not the look his PR team was going for. Though Musk is initially cautious, it doesn't take long before he takes a hit, then swells some booze. The party boy appearance does nothing to tranquilize Musk's image.

26:28It's another head-scratching moment for everyone, from investors to critics to Tesla staff. But Musk seems unfazed.

26:42It's October 2018 on Wall Street. Two traders are grabbing a drink after a hell of a Monday. They spend a lot of time paying close attention to Tesla. Holy crap, thank God Musk settled with the SEC. You know, even as crazy as he is, without him running this show, no telling what might happen to that company. I know, the guy keeps failing upwards, but people love Tesla. Stock was up 17 % after the SEC announcement. That's a one-day record for Tesla. And they actually managed to hit like 83 ,000 Model S deliveries. Not the 100 ,000 Musk's been promising, but still, yeah, it's kind of amazing. But the most amazing thing of all, now can I get a drumroll?