Politics

Here Are the Real Reasons for Tesla’s Coming Downfall

Famed entrepreneur Elon Musk ought to take to heart the old adage that you end up accomplishing nothing by trying to do everything

Billionaire tech maker and entrepreneur Elon Musk has built a growing empire running ventures that make electric cars, solar panels, and rockets that are launched into space. And recently, Musk began a new project in the nation’s capital, building his Hyperloop system to take people from Washington, D.C., to New York in less than an hour.

But how can the billionaire entrepreneur continue to keep going beyond in transforming the business and tech industry when forecasters have already raised concerns that he is overextending himself way beyond capacity?

In recent weeks, Tesla has gone through a series of problems, with a recent car crash killing a person seated in a Tesla semi-autonomous driving system — Model X. This led to the company’s stock plunging after the National Transportation Safety Board (NTSB) announced it would probe the crash to see whether the car was in autopilot mode when it hit the freeway safety barrier and caught on fire.

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Shortly after the crash, Moody’s downgraded the company’s credit rating, citing that Tesla is burning through $2 billion a year due to its poor Model 3 production rate and tight financial situation. The credit rating agency noted Tesla would need to, as CNBC put it, raise “more money in the near future to meet its cash needs and maintain its ‘expected pace of expansion.'”

But Tesla is facing other problems, including its recent departure of three of its top financial executives, along with losing a majority of its top talent over the past several years. This week, Musk ceased Model 3 production again, despite the fact that the car line is already years behind schedule and many consider now to be do-or-die time. Many analysts, including some employees who have left the company, are putting all the blame on Musk himself.

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What about Musk’s other venture, SpaceX? According to The Mercury News, “Tesla lists its dependence on Musk as a risk factor in securities filings, and some experts and short sellers have raised concerns that the car maker could run into trouble because of the amount of attention he devotes to other ventures including rocket company [SpaceX].” When analyzing SpaceX’s current state of play, it is easy to understand why.

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Musk seems to have just as many efficiency problems with SpaceX as he does with Tesla. Recent federal reports show that SpaceX has 33 major nonconformities from quality control standards and underscore governmental apprehensions about the company’s ability to ferry astronauts into space in a safe manner.

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Yet SpaceX proclaimed on Tuesday that it will still begin constructing a new rocket, the BFR, in California to shuttle humans into space. This announcement should concern Tesla investors, federal taxpayers, and national security analysts alike.

Musk initially said that his Falcon Heavy rocket — a rocket that launched for the first time this year despite an original promise of 2013-2014 — would fly crewed missions, but he has since scratched those plans and will instead make the Falcon Heavy obsolete with the BFR.

It is unclear what specifically prompted Musk’s change of heart. Perhaps it had something to do with his doubts about the Falcon Heavy’s reliability. Or perhaps he realized that poor design decisions will hinder the Falcon Heavy from succeeding commercially.

Regardless of his reasoning, SpaceX is now expecting more government funding for the development of this new rocket, which has already received more than $74 million in taxpayer subsidies. Meanwhile, the American people are still waiting to hear what lessons Musk learned from the Falcon Heavy, and how exactly the billionaire is dealing with the government’s security concerns — an issue of grave importance, given that the BFR will literally mean life or death for many American astronauts.

Herein lies the reason Tesla’s is now the most shorted stock in all of Wall Street. As the company continues to raise its capital with no positive free cash flow, the private sector is beginning to realize that Musk — although undoubtedly a smart man — cannot do it all. There are too many significant problems across the many ventures within his empire. The backlog makes rectifying them all, at least on the timetables that he provides, virtually impossible.

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As the old saying goes, if you try to do everything, you end up accomplishing nothing. Given that Musk’s net worth is tied directly to Tesla’s stock price, it would be wise for him to begin narrowing his focus and choosing which of his ventures is most important to him.

One thing is for certain: Musk cannot continue producing electric vehicles and rockets, among many other gadgets, at the same time. It is unfair to investors, unfair to taxpayers, and dangerous to our national security. Over time, it will become financially unsustainable for him personally as well.

Perhaps it is time for federal and state governments to force the billionaire to become more accountable.

Perhaps it is time for federal and state governments to force the billionaire to become more accountable by withholding the billions of dollars in taxpayer money that go to his ventures every year, starting with the BFR.

If history has taught us anything about the business world, it is that the drought of money wells tends to prompt swift, corrective actions by America’s entrepreneurial class. Should the government act soon, I have little doubt that Musk will become a case study, not an exception, to this axiom.

Mona Salama is a freelance writer based in New York City. She previously worked as a reporter for Breitbart News and Politichicks.com.

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