Musk Visits Beijing, Tesla Shares Up 15%, Cuts Costs

Key Takeaway

• Elon Musk's Beijing visit boosts Tesla with a 15% share jump, securing data security compliance for FSD and a Baidu partnership.
• Musk enacts major cost-cutting at Tesla, including Supercharger network staff reductions and executive dismissals.
• Amidst a Chinese EV price war and U.S.-China tensions, Tesla's strategic pivot raises investor debate on its future direction.

Musk's Strategic Moves in China

Elon Musk's recent visit to Beijing marked a significant moment for Tesla, as it showcased the CEO's ability to navigate complex international waters and secure strategic advantages for his company. During the visit, Musk met with Chinese Premier Li Qiang, which was followed by the announcement that Tesla's electric vehicles had been tested for data security compliance, a crucial step for the deployment of Tesla's semi-autonomous driving technology, FSD, in China. This development is pivotal for Tesla, considering Musk's belief in FSD as central to the future of electric vehicles. Additionally, a partnership with Baidu was confirmed, granting Tesla access to vital navigation, mapping, and data systems. These moves were well-received by the market, with Tesla shares jumping 15 percent, providing a much-needed boost after a significant drop earlier in the year.

Leadership and Cost-Cutting Measures

Back in Austin, Texas, Tesla's headquarters became the center of dramatic organizational changes initiated by Musk. An internal memo revealed Musk's decision to significantly reduce the division responsible for Tesla's EV "Supercharger" network, including the dismissal of two senior executives and hundreds of staff. This decision aligns with Musk's historical management style, emphasizing cost reduction and efficiency. Musk's approach to leadership, especially his demand for a "hardcore" commitment from his employees, has been a hallmark of his tenure across his companies. However, these recent actions at Tesla have reignited discussions about Musk's management style and its impact on the company's direction, especially as Tesla pivots towards a focus on autonomous driving, artificial intelligence, and robotics.

Challenges and Controversies

Tesla's strategic and organizational shifts occur amidst a backdrop of significant challenges. The company is navigating a price war with Chinese EV manufacturers and geopolitical tensions between Beijing and Washington. Musk's closer ties with China, including agreements on data transfers, could potentially lead to a backlash from U.S. policymakers. Moreover, Tesla's decision to overhaul its Supercharger network and the broader strategic pivot towards AI and robotics have left many stakeholders questioning the company's future direction. These decisions, particularly the layoffs and the halting of expansion plans for the Supercharger network, have sparked debate among investors and analysts. Some see these moves as necessary adjustments to a changing market landscape, while others view them as missteps that could hinder Tesla's growth.

Street Views

• Bill Russo, Automobility (Neutral on Tesla and Elon Musk's strategy):

  "He’s polarising, his positions are alienating some of his core constituents, including the state of California. Now, can he thread the needle, and in a very bifurcated world, act in a way that goes against the grain of the geopolitical bias that exists in the west towards China?"

• Ross Gerber, Gerber Kawasaki (Bearish on Tesla's recent actions):

  "He is laying off people critical to the success of Tesla over his misguided belief system. Tesla can’t sell cars because of him. His response is to blindly eliminate costs instead of addressing the real issue." "Supercharger was the fastest growing part and profitable. A monopoly in charging is a massive value generator for Tesla. It is a horrible step backwards."

• James Anderson, Lingotto Investment Management (Neutral on Elon Musk's leadership style):

  "The approach has always been idiosyncratic and extreme ... it would be odd to suddenly expect normality in decisions and staffing. If autonomous, not volume, is the driver [of growth] then fewer people with a different vision are required. Is this hard uncomfortable and extremely demanding? For sure."