Tesla is a very popular car brand, but it is no stranger to difficult times and controversy. Elon Musk is the epitome of success. Born in South Africa in 1971 he has amassed a net worth of $19.7 billion. Starting up his own software company, Zip2, in 1995 and quickly signed contracts with The New York Times and the Chicago Tribune to be the software provider for their city guides.
He sold his 7 per cent interest when the company was acquired by Compaq in 1999 for $22 million. In 2004 Musk invested in the year old company started by Martin Eberhard and Marc Tarpenning, Tesla, and became its CEO in 2008. That year Tesla sold 2,500 cars in 31 countries. As of 2018 Tesla is worth $650 billion and has built a reputation as the go to company for stylish environmentally friendly electric cars. But all is not well with Tesla. Beneath its luster their lurk a great many problems: corporate shake-ups, quality control issues, and child labor among others.
Also, most models built by Tesla aren’t cheap. Although the company has tried recently to make their cars more affordable with the Model S, even low end Teslas can average about $70,000. With all these issues and more, the car buyer who wants to be eco-friendly may want to think twice before putting several thousand dollars on a Tesla. There are more economical choices out there from companies that are on better financial ground and have much fewer problems.
In 2004 Musk invested in the year old company started by Martin Eberhard and Marc Tarpenning, Tesla, and became its CEO in 2008. That year Tesla sold 2,500 cars in 31 countries. As of 2018 Tesla is worth $650 billion and has built a reputation as the go to company for stylish environmentally friendly electric cars.
But all is not well with Tesla. Beneath its luster their lurk a great many problems: corporate shake-ups, quality control issues, and child labor among others. Also, most models built by Tesla aren’t cheap. Although the company has tried recently to make their cars more affordable with the Model S, even low end Teslas can average about $70,000. With all these issues and more, the car buyer who wants to be eco-friendly may want to think twice before putting several thousand dollars on a Tesla. There are more economical choices out there from companies that are on better financial ground and have much fewer problems.
20 TESLAS AREN’T CHEAP
Tesla cars are known for their slick looks and environmentally friendly electric motors. But that comes at a cost. High end Teslas, the 100 Series, can range from $94,000 to $140,000. In 2017 Tesla put the Model 3 on the market for the fairly reasonable base price of $36,000.
Initial cost isn’t the only expensive thing about a Tesla.
Because it has an electric engine it isn’t easy to repair by the average mechanic and often requires a trip to a dealer or Tesla certified mechanic. And (see below) trips to the garage are becoming more frequent for Tesla owners.
19 MAINTENANCE PROBLEMS
This is strange in that older cars seem to have more maintenance problems due to age and wear. Newer Tesla models seem to have more problems reported by owners than their previous models. On the Model S, problems include: warped brake rotors, door handles that fail to slide out as a driver approaches, leaking cooling pumps for the battery pack, dead windshield wipers, persistent alignment issues with the wheels, and misaligned latches for the front trunk lid and the rear lift gate (greencarreports.com). Now most of these problems are covered by the manufacturer’s warranty and owners have been happy with Tesla’s response to these issues.
18QUALITY CONTROL PROBLEMS
Even new cars have issues, but it seems Teslas have suffered far more problems than should be expected right off the assembly line. One of the major complaints on new Teslas is the paint job which include peeling, insufficient thickness, and various marring on the doors, and that was on a Model S 85D which has a base price of $110,000 (www.thedrive.com).
Power steering has proven an issue as well.
New owners have said power steering has failed twice within 6,000 miles. A-pillars (the upright supports on the left and right of the windshield) have also cracked from poor manufacturing procedures
17PROBLEMS WITH ITS WORKFORCE
16 FILLING ORDERS
Tesla continues to be a popular car and its new consumer friendly Model 3 was eagerly anticipated. So much so that over 500,000 were ordered since 2016. But by February 2018 only 30 were delivered. Tesla, it seems, has a habit of over promising and under performing, some of which may be explained by the way it treats its workers.
Musk made the claim in February 2017 that Tesla would ramp up production to 5,000 cars a week by the end of the year.
But by November of that year he had to pull back on his claim. Some future owners may have to wait up to three years for delivery.
15CHILD LABOR ISSUES
Tesla car’s batteries require cobalt, a mineral found in abundance in central Africa, mostly in the Congo. Cobalt is in great demand for not only Tesla but Apple and any other tech company that uses batteries made from it. Problem is that the mines that deliver cobalt often hire child labor to collect it and then pays them slave wages, if it pays them at all. More then 40,000 children, some as young as 8, hand mine cobalt with few if any, safety or health precautions. Tesla claims little cobalt is used in the production of their batteries, a claim that is dubious.
If quality control and delivery problems with the Model S weren’t enough, now they’ve had to recall over 100,000 of them. As mentioned in the quality control entry, power steering issues are rampant. The bolts holding it together are susceptible to corrosion, especially in wet and winter weather, and often shear off making the power steering difficult to operate forcing Tesla to recall 123,000 Model S units.
Most of these recalls effected cars sold in Europe and the recall was voluntary.
But it fell into the we-don’t-need-anything-more-to-go-wrong-category especially at a time when Tesla had enough bad press among other issues.
13 MUSK CAN BE DIFFICULT
For some one with a net worth of almost $20 billion, Elon Musk can be rather ungrateful and downright rude. During an April conference call he insulted stock analysts, the media and even a driver who was killed using the self-driving Autopilot feature (more on that later). He even took his anger out on investors who are worried about the volatility of Tesla stock (more on that later too). Instead of calming their fears, as a selfless CEO would, he said if they were worried, they should invest in Ford. Even Tesla executives are not immune from his lack of manners.
12 STOCK ISSUES
When a high-ranking executive leaves a successful company, without retiring, it usually isn’t a very good sign. Within the first two months of 2018 two very high ranking Tesla executives have departed. In the first three months of 2018 Jon Mcneil Tesla’s president of global sales and services left the company to join Lyft as its chief operating officer and Eric Branderiz, Tesla’s Chief Accounting Officer, left the company for personal reasons less than two years after joining the firm.This follows the February 2017 departure of Jason Wheeler, then Tesla’s CFO. It remains to be seen if these departures are a case of abandoning a sinking ship or something else. (Source: Forbes.com).
10 INVESTORS ARE UNHAPPY
As mentioned in the stock entry, the up and down path of Tesla on the market has made investors nervous, and Musk’s attitude towards them has turned that nervousness in to a tastable resentment. In May they planned a vote to have him and his brother kicked off the board of directors, a vote Musk won, but only just barely. Despite this, Musk hasn’t exactly gone out of his way to increase their confidence. As mentioned earlier he has insulted them and his constant exaggeration of production numbers for the Model S continues to be a thorn in their side and he may not survive another vote.
9 AUTOPILOT ISSUES
Currently Tesla stock is selling at about $320 a share, not bad. But over the last year it has gone on a roller coaster ride with lows at $252 and highs at $389, which makes investors nervous. Not helping matters is a recent revelation by a former Tesla employee to the SEC that the company has gone out of its way to cover up recent problems with its batteries and Musk’s constant bragging about production numbers, inflating them by as much as 44%. Tesla filed a libel suit against the former employee although there is some evidence to back up his claims.
11 LOSS OF TALENT
This follows the February 2017 departure of Jason Wheeler, then Tesla’s CFO.
It remains to be seen if these departures are a case of abandoning a sinking ship or something else. (Source: Forbes.com).
10 INVESTORS ARE UNHAPPY
As mentioned in the stock entry, the up and down path of Tesla on the market has made investors nervous, and Musk’s attitude towards them has turned that nervousness in to a tastable resentment. In May they planned a vote to have him and his brother kicked off the board of directors, a vote Musk won, but only just barely. Despite this, Musk hasn’t exactly gone out of his way to increase their confidence. As mentioned earlier he has insulted them and his constant exaggeration of production numbers for the Model S continues to be a thorn in their side and he may not survive another vote.
9 AUTOPILOT ISSUES
Autopilot was a feature that allowed Teslas to self-drive, one of the first commercially available cars to do so. Unfortunately for Wei Huang, a 38 year old man from California died in a crash while using the Autopilot feature on his Model X SUV, the second such fatality with the system. Critics say the ease with which Tesla’s system handles regular freeway driving can lull a driver in to thinking its more capable then it is and allow them to become distracted or take their eyes off the road (wired.com). Tesla has paid out large settlements with the families of both drivers.
8 BAD PUBLICITY
Tesla and Musk can’t seem to get out of their own way when it comes to negative press. The answers given for the Autopilot crashes were handled poorly (see the criticism entry), and Musk has had, at best , adversarial attitude towards the press. During a recent corporate conference call Musk cut short the Q&A, deeming their questions about Tesla’s finances “boring” and “bonehead” and taking questions instead from a 25 year old YouTuber who had tweeted him on Monday.
As Tesla’s stock plunged in after-hours trading, Musk detoured into a rant against the dishonest media.
With their current issues, fighting with the press is the last thing they need. (Source: Slate.com).
7 SPENDING PROBLEMS
In business school the first lesson on the first day starts, “A successful business must take in more money than it spends.” a lesson many at Tesla seem to have skipped. According to Business Insider Tesla hasn’t had a yearly profit since its initial IPO in 2010 and is burning through a staggering $6,500 a minute. Car companies typically spend vast sums on advertising and R & D but Teslas money problems mostly stem from their failure to deliver the less expensive Model 3 in sufficient numbers causing people who reserved it to cancel their orders. Musk has claimed Tesla will turn a profit by the end of 2018.
6 REVIEW PROBLEMS
Much like movie studios, car makers can live and die on reviews from the automotive press, and many times those reviews have not been kind to Teslas. The Model 3 has been in the firing line for some rather harsh criticism. Consumer Reports, the benchmark for car reviews has said, “Our testers also found flaws—big flaws—such as long stopping distances in our emergency braking test and difficult-to-use controls.” But maybe none are so damning as the one from Autoline Network.com’s John McElroy, a veteran of the car industry, who said he could not imagine “how they (Tesla) released this (the Model 3).”
5 BRAKING ISSUES
Every car should be able to do two things at a minimum, stop and go. Tesla has some some problems recently with the former.
Most drivers should expect their cars not only to stop, but to stop within a reasonable distance.
As mentioned in the review entry, Consumer Reports, the epitome of car testing and reviews had this to say about the Model 3’s braking, “it took 152 feet for the vehicle to go from 60 mph to a complete stop, which is ‘far worse than any contemporary car we’ve tested.” By comparison, the less than $15,000 Ford Fiesta has a 60 mph braking distance of 119 feet (consumerreports.com).
4 PASSING THE BUCK
3 PROBLEMS WITH THE GOVERNMENT
It goes without saying that companies do not like bad press and it should go without saying that companies should never be in the cross hairs of the Federal Government. Tesla faces possible intervention from the NLRB for their treatment of their workers, a possible investigation by the SEC due to a former employees’ whistle blowing, and investigations by the NTSB for the Autopilot crashes. To top it off, Musk has gone back on a vocal promise made to then President-elect Trump by planning to move some production to China, pretty much ensuring he will not be on his good side anytime soon.
2 MUSK DOESN’T TAKE CRITICISM WELL
You’d think someone worth almost $20 billion would have a thicker skin. Well you’d be wrong in the case of one Elon Musk who takes criticism with all the grace of a six year old on the school play ground. Getting back to the fatal Autopilot crash, instead of either a.) keeping a low profile and letting spokespeople answer for him, or b.) being apologetic to the families and say that the company was doing its best to deal with the issue he when with c.) suggesting, journalists who report on Autopilot crashes are themselves endangering the lives of Tesla drivers by discouraging them from using the software (Slate.com). Class move Elon.
1 FINANCIAL PROBLEMS
Despite its current $650 billion worth, Tesla is in trouble financially. First, it took almost ten years to turn a profit and ended 2017 with a $675 million quarterly loss.
Musk has brushed off Teslas money issues by both being flippant by telling investors to buy stock in Ford and bidding his time.
He has said that Tesla will turn a big profit by the end of 2018 and with his record of pulling off the seemingly impossible on a consistent basis, shareholders are willing to hang on, for the moment. But unless things turn around, Musk may find himself and his company in dire straights.
Sources: edmunds.com, nbc.com, futurism.com
