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It was late 2016. Tesla CEO Elon Musk had confidently told investors that his company would be cranking out 500,000 electric cars a year by 2018.
This anecdote is emblematic of Musk’s management style, Tesla insiders told CNBC. Interviews with 35 current and former employees depict an ambitious CEO whose drive to make everything from scratch sometimes impaired his decision-making, leading him to approve expensive projects that failed and delayed production. They also described occasions where Musk refused to consider methods pioneered by other automakers, and ignored advice from industry veterans within Tesla’s ranks.
Tesla’s future as a mass-market car company hinges on efficient, automated production of the Model 3. Tesla will lose $6,000 for every $35,000 Model 3 it sells, says UBS analyst Colin Langan. It only breaks even if the car sells for over $41,000. Tesla has yet to produce the $35,000 base model of the Model 3.
Tesla did meet the goal of producing more than 5,000 Model 3 vehicles in a week during the third quarter. It made 80,142 vehicles (including 53,239 Model 3’s) beating Wall Street analysts’ expectations. But the company is nowhere near the 500,000 mark Musk promised in 2016. As of the end of Q3, Tesla has produced 167,975 cars this year. To put that in context, Ford makes that many cars approximately every 10 days.
Tesla promised investors that it will achieve positive cash flow and profitability in the second half of 2018. But some investors and analysts are deeply skeptical this will happen. Tesla’s debts are quickly coming due: The company has to pay around $230 million in November, part of a larger $1.3 billion debt bill coming due in March 2019, according to AP.
Faith in the Tesla CEO is being tested like never before. Investors are wary of his social media and legal battles, attitude towards regulators and recreational drug use.
Many employees think Musk is essential to the company’s success. They praise his creativity, sense of humor and inspiring speeches. Some credit his hands-on management style with building a great company. A former Tesla and SpaceX employee, Spencer Gore, who is now the CEO of Impossible Aerospace, explained:
“Elon Musk is in a position most will never experience — trying to deliver an industry-defining product on a limited budget. He can’t afford to make decisions slowly, or even always compassionately. When he involves himself in low-level details it’s to enhance execution speed. For some engineers, this can be frustrating, at times heartbreaking — but Elon’s unconventional style is what built the Tesla we all chose to join.”
But other employees describe how Musk’s management style has increased costs and complexity in the factories.
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