Encore: Tesla vs Detroit | Elon Musk...It's Complicated | 5

0:08I'm David Brown and this is Business Wars.

0:30A lot has gone down since the last time we brought you our series on Tesla versus Detroit. You may recall billionaire Elon Musk buying a little entity called Twitter, effectively disrupting all of Silicon Valley again. Now that the dust has settled a bit, we wanted to examine that purchase and explore the ramifications it's had on not only the world of tech, but within the greater Musk universe. Spoiler alert, Tesla's a huge part of that. To dig into how Tesla's been affected, we brought back Bloomberg News reporter Dana Hull. She joined us before to discuss her coverage of allegations of racism at Tesla's factories.

1:09And now she's bringing an update on how the company's faring under the shadow of Musk's newest business venture. Later, we'll be joined by Tim Higgins, tech and auto reporter at The Wall Street Journal. He's the author of Power Play, Tesla, Elon Musk, and the Bet of the Century. He's unpacking the lore that surrounds Elon Musk and discussing whether his Twitter bet will actually pay off. All that's coming up next.

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3:43dana hull is a reporter covering tesla for bloomberg news dana welcome back to business wars great to be here bring us up to speed on how tesla is doing these days i've been reading a lot about them you know the truth is that tesla is in a very strong position they were the market leader in evs for over a decade and now the entire kind of auto industry is shifting to evs They have this incredible supercharger network, which customers really like. They have about$22 billion in cash on their balance sheet. And they are expanding further and further into sort of energy. I mean, they've always said they're not just a car company.

4:20Their mission is really to accelerate the advent of clean energy. And we saw some news over the weekend where they're building a second factory in China to build the Megapack, which is the name of their stationary battery storage product. So, you know, they're doing pretty well. I mean, they're in a good spot. Now, when you say, I mean, you talk about the Megapack and other things that Elon Musk is involved in. Is the Megapack part of Tesla per se, or are we talking about other projects that Musk is involved in? No, no, this is part of Tesla. So Tesla has sort of two business units. There's automotive, and obviously, you know, Tesla is known first and foremost for its cars.

4:59But there's also a section or a business unit called Tesla Energy, and that sells products like the Powerwall, which is the home battery, the solar roof, and then the Megapack. And the Megapack is basically Tesla's name for this massive battery that is marketed to utilities. And so Tesla has a factory to build Megapacks here in the Bay Area in a city called Lathrop. And over the weekend, they announced they're planning to build a second Megapack facility in Shanghai. And so, you know, I think what you're seeing is that Tesla's kind of next phase of growth, they're obviously still going to continue to build cars, but they are very much trying to build more batteries for utility companies.

5:39Right. Well, let's shift to the cars, no pun intended. The price cuts on the cars that we've heard about, how is that affecting the company's bottom line performance over the past year? Well, it's definitely going to hurt profit margins, but Tesla has the biggest profit margins in the auto industry right now when it comes to selling EVs. So they have room to maneuver here. Yes. And Musk has said very clearly that he's going to chase volume over margins, that he thinks that in order to transition to clean energy and clean transportation, they need to make more affordable cars. We saw the price of electric cars across the board really creep up quite a lot during the pandemic when there was a big chip shortage.

6:20Now prices are beginning to come down. And Tesla is slashing them further because they really want to maintain that front pole position. They don't want to lose market share to competitors. And they have room to maneuver because they sell their cars directly to consumers so they can control the pricing. They don't have to worry about dealerships and different dealers doing different things. So Tesla changes prices quite a bit, but we have seen them slash the prices across the board since the beginning of the year, and they could still go down further. You know, I have noticed a lot more competitors on the road, and we're talking about companies like Rivian.

6:56There is the Lucid that I've seen. I've seen a couple of those out here in Austin, Texas. But I've also been hearing from a lot of folks that they're looking for alternatives because of Elon Musk's own personal profile and how it has grown and changed of late. What are you hearing about people actually buying Teslas? I think that the Tesla brand has taken a bit of a hit thanks to Musk's politics and the fact that he bought Twitter. And in, you know, I mean, in California, which has long been kind of Tesla's biggest market here in the U.S., there are definitely like never Tesla people who were like, I'll never buy a Tesla because I hate Elon Musk and his politics.

7:37But I think it's important to remember that Tesla is a global company. I think fundamentally people buy cars because of the product, because of the range, because of the price. There is a subset of consumers who are really turned off by Musk and probably never will buy a Tesla. But then you have to ask yourself, well, what are you going to buy instead? And we don't see other automakers making enough cars in high volume yet. There's not like a head-to-head competition just yet. Well, so then is Tesla still considered the gold standard for consumers when it comes to EVs or not so much? I think it depends on who you talk to.

8:11I mean, certainly when it comes to range, absolutely. And when it comes to the supercharging network, 100%. Others within the auto industry will always knock Tesla for their lousy customer service. I mean, the company has not grown its service operation in tandem with just the volume growth of units sold. And things like fit and finish and panel gaps and paint, you know, I mean, people who are like used to luxury cars kind of knock Tesla on that front. Yeah. But if you're looking for a car that can go 300 miles without needing to charge at a relatively affordable price point, Tesla is still the main one.

8:48What about a redesign of the cars? I mean, a lot of other brands tend to change up the body style. Tesla's have pretty much remained the same. What about that front? Yeah, and there's a lot of rumors and speculation that they are doing a refresh. We just haven't seen it yet. Typically, like a major refresh is done every five to seven years. Tesla doesn't really go by model year per much. And, you know, Tesla's way of refreshing the car is to send you over-the-air software updates. So the car is always getting better in terms of features like streaming Netflix or dog mode. But in terms of like a full-on redesign, we haven't seen like a full announcement of that yet.

9:25I mean, there's a lot of rumors in the kind of Tesla fan, you know, ecosystem about, you know, they call it Project Highlander and Project Juniper. And, oh, there might be new headlights and they might be redesigning the cabin. We haven't seen Tesla like officially announce a fully refreshed model of any of their existing models just yet. In the meantime, what about the Cybertruck? I mean, that was what everyone was buzzing about. And I have yet to see one on the road. And I don't think they have any in the wild unless maybe one or two test versions. Yeah, there are a few production prototypes that are being tested.

10:00And, you know, if you're on Twitter at all, you'll see these shots. Lots of, oh, like, Cybertruck being tested at the Fremont track or a Cybertruck, you know, in Austin. But they are not anywhere near production. And on the last earnings call, I think Musk was pretty clear that, like, they're going to slowly begin production at the end of this year. But it's not going to be volume at all. I mean, this was a vehicle that we first saw, I think it was in November of 2019. And they are not in volume production yet. And, you know, it's interesting because a lot of Americans really do like trucks. And it's a risk for Tesla that they really don't have a pickup truck yet.

10:32And the Cybertruck, arguably, I mean, it doesn't really look like a pickup truck. So in the meantime, you know, Rivian and Ford and others are really kind of owning that segment of the market. Is there a plausible reason why that Cybertruck has been stuck in neutral for so long? You know, I think that I think the pandemic certainly threw everyone's business plans out the window for quite a while. The Cybertruck is also difficult to make. It has an exoskeleton. It's all stainless steel. It's a new design. And then Tesla just has a lot on its plate. It's growing this factory in Austin as well as in Berlin.

11:08They're kind of expanding into China. They announced that they're going to build another plant in Mexico. I think it's definitely still part of the product lineup. But I think as we saw with the semi-truck similarly, it just takes a while for Tesla to bring new vehicles to market. And they tweaked the design for a while. And I don't know what the holdup is, but the company has a lot of other things going on. Well, Dana, there's another factor here, and I think that that's, you know, Elon Musk has repeatedly throughout his career, if you look back at it, made rather big promises and delivered in, you know, delivered in a major way on some.

11:44But the Cybertruck is an example of one where he says it's going to happen and it doesn't and it keeps getting pushed back and it keeps getting pushed back. And I wonder whether or not that alone, without a single sale of Cybertrucks in the wild, if that could be a real thorn in Musk's side, that itself, just not sort of a constant reminder that, you know, maybe some of these great promises are going unfulfilled. I mean, certainly that's an issue for some investors, but I think overall people look at the long arc of Musk's career and what he's accomplished with both Tesla and SpaceX, and they believe that he will get there eventually.

12:24And he himself jokes that like, you know, he might be late, but he always delivers. And I mean, people within the company joke about regular time versus Elon time. I mean, look at the semi truck. We first saw that in 2017, and now they've got a couple hundred out on the road. Right, right. They're not in high volume for that yet either. But, you know, I think, I mean, you will have hardcore customers who will, they put down a deposit on the Cybertruck and they'll wait five or 10 years for that thing because they like it so much. I think people who follow the company closely know that things are often late and that's just kind of the way the company has always run.

13:00And it's okay because ultimately people feel like their product is worth it. Oh, I have to ask, and I think a lot of people have difficulty with this, where does Tesla end and Elon Musk begin? I mean, he's essentially become synonymous with the brand clearly and still seems to call a lot of the shots personally. Or is that just the way it appears? No, I mean, he is the CEO and the largest shareholder. And for a long time, he was the chair of the board. I think what you are beginning to see, though, is that as they mature as a business and as Musk pursues other interests like owning Twitter, that they are trying to show to investors that they have a deep bench of talent.

13:36So last month in March, they had this big investor day at the Austin plant and they made a huge show of bringing out all of these other executives, all the other executives spoke and they had like 16 people on stage. They're trying to kind of show to people that they have a deep bench of talent and that it's not just Elon. Although obviously, you know, the company does not spend money on traditional advertising and the brand, Elon, the brand and Tesla, the brand have been closely intertwined for two decades. Yeah. Yeah. What do we know about that Twitter effect and how that's impacted his day-to-day involvement with Tesla?

14:13Seems like he's always focused on Twitter these days, but maybe I'm just seeing part of the picture. I mean, I think the thing to remember is that Musk has never been a full-time CEO at Tesla. He founded SpaceX before he ever got involved in Tesla. And then for a long time, he was just running two companies. Now he's running three. I think, you know, he borrows engineers from one part of the empire to the other. So we know that several engineers from Tesla went over to Twitter to help out. And when you talk to people at Elon's various companies, they don't say, oh, I work for SpaceX or I work for Twitter or I work for Tesla.

14:47It's always I work for Elon. And so there is some sort of overlapping interests between all of these companies. You think investors are reassured that, well, it's not all resting on Elon's shoulders? Yes, he has a lot of talent behind him. But with so many ventures, is that giving investors a certain bit of, I don't know, stomach pain? Certainly last year in 2022, it did for sure. because what we saw was that Musk sold off billions of dollars worth of his own Tesla shares to help fund the Twitter purchase. And those share sales really spooked people and really freaked people out. That seems to have settled down.

15:30Tesla has now added another named executive officer in the proxy that they filed last week. They announced that Tom Zhu, who has been kind of overseeing Tesla's operations in China, is now the vice president of automotive. So, you know, They've sort of added to that bench of talent by actually naming him as an executive officer. And there's always risks involved. But I think that the investors who have a long-term vision and a long-term belief in Tesla are still very much believers. Well, what about the next leap? And I wonder, you know, some people would say if there is to be that next big thing for Tesla.

16:08Is Elon Musk too distracted to take on something like that? Well, I think the one risk that Tesla faces is around this whole idea of full autonomy. So that is the one thing that a lot of people are paying attention to. I mean, as you'll remember, you know, Musk promised that 2020 was the year of the robo-taxi. There was this whole idea that your Tesla would be completely autonomous, fully self-driving. There'd be this whole kind of connected robo-taxi Tesla fleet that you could be a part of. And we haven't seen that yet. I mean, Tesla's current system, which they call Autopilot, is a level two driver assistance feature.

16:44There have been several accidents and, you know, they are very far from full autonomy. Now, you know, Musk will tweet and a lot of people say that it's just around the corner. It keeps getting better and better. But from a regulatory perspective, they are not a fully autonomous car yet. And a lot of Tesla's valuation is based on this idea that they will get there. The next big leap would be, you know, actually having a car on the road that is legally considered in the eyes of the U.S. regulatory agencies a fully autonomous car. And it's a big question as to whether Tesla will get there or not.

17:17Having said that, I think that there are some questions that some people are asking out loud. Will Elon Musk be at the head of Tesla for the foreseeable future? Right now, he's busy with Twitter. Is there a Tesla without Elon Musk or is that just unimaginable? I think he will always be at Tesla. I could see him potentially not being the CEO and taking on another role like product architect or product designer. What he has said is that he's actually looking for someone else to run Twitter. And Tesla investors would be thrilled with that. You know, I could see him getting a new CEO for Twitter versus him stepping down as the CEO of Tesla.

17:57Dana Hull is a reporter covering Tesla for Bloomberg News. Dana, thank you so much for joining us once again on Business Wars. It's been a real treat. My pleasure. After the break, we're diving into the man behind the billions. Stay with us.

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20:15Elon Musk is an enigma, to say the least. One minute, he's using Tesla to revolutionize the car market. The next, he's smoking a joint on air with podcast host Joe Rogan. So it's like Posh Pot Tobacco Posh. You never had that? Yeah, I think I tried one once. Come on, man. You probably can't because of stockholders, right? I mean, it's legal, right? Totally legal. Okay. Musk catalyzed the modern space race, and he also changed Twitter's logo to Doge, the Shiba Inu who became the symbol of the Dogecoin. What seems to many an erratic nature has generated him plenty of fans and plenty of critics. There's a lot to unpack with this multi-billionaire, and here to help us go beneath the surface is Wall Street Journal tech and auto reporter Tim Higgins.

21:01He's covered Musk for years, and his book, Power Play, Tesla, Elon Musk, and the Bed of the Century, explores how the tech entrepreneur built Tesla into one of the most influential companies in the world. Tim Higgins, welcome to Business Wars. Well, thank you for having me. Elon Musk has been in the game for more than two decades now, by my count, with the tech ventures that predated Tesla when you get down to it. When did Elon Musk really start popping up on your radar as more than just another venture capitalist? Yeah, Elon's a longtime entrepreneur. He arrived in Silicon Valley just as kind of the web boom was taking off in the 90s, had an idea for putting the phone book of all things online, and had a startup, made a little bit of money there that he then parlayed into a digital banking startup that we would now know as PayPal.

21:51And that's really where he made his first fortune that allowed him to invest in kind of the big ideas that were rattling around in his mind. And that is space and electric cars. Just to be clear, because I think there's some misunderstanding about his role with Tesla. He didn't actually launch the company, although I think he likes to take credit as a founder, right? There would not be a Tesla that we know of today without Elon Musk. But you're correct. The initial Tesla Motors was created by some Silicon Valley entrepreneurs who were excited about the potential electric cars. But the problem they had is they couldn't find financing for what was really a rather improbable idea in the early 2000s.

22:37It just wasn't the kind of investment that a typical Silicon Valley venture capitalist would be interested in because of the rate of cash that was going to be needed and kind of the turnover. And they stumbled upon this guy named Elon Musk, who at the time was living in the Los Angeles area. He kind of started to develop this quirky kind of reputation as taking rather unique bets. He was putting his fortune into a company called SpaceX. He was talking about going into outer space. Here was a guy that was really kind of excited about the hard to do projects. Yeah. Well, at what point then did that tip into a kind of Elon Musk fandom?

23:16The fans initially there were for Tesla. And really, Elon's kind of entry into the scene comes when he takes control of Tesla as the CEO and really starts to become the face of that company. really late 2008, 2009, 2010, and then is the guy who is trying to sell his vision of what the company can be. And Elon's bet was that the Model S luxury sedan could show the world that there could be an electric car that could compete with the best of the best, that could compete with Mercedes and BMW, that it would be the best car that just happened to be electric. And this was the dream he was selling. This is when his profile starts to get out there.

24:03He's selling his company. He's selling it not only to customers, but more importantly, to the investor community, which would be so important for the ability for Tesla to keep the lights on until they could get to the point where they were a viable company. And so here he is. He's the salesman for Tesla, the brand, the idea. It was really unlike anything at the time. And that just attracted a lot of attention, and Elon was kind of wrapped up in all of it. But tell me if I'm wrong here. I'd be interested in your opinion on this. What Tesla seemed to bring to that whole discussion was a kind of sexiness.

24:39I mean, is that too much? That was absolutely what they were aiming to do. And in fact, if you spell out the product lineup for the company, the Model S, the Model X, the Model 3, which was supposed to be the Model E, this was all going to spell out sexy. And the Model Y. Right. Yeah, sure. And so this was absolutely the goal here was, and think about it, one of the original insights that Tesla, the company, had when they were thinking about starting, the original founders were thinking about it, is they were driving around Palo Alto, kind of this looking at driveways in the community. And they were seeing parked in these driveways, Toyota Priuses next to whether Porsches or BMWs.