This July, Tesla sold fewer than 1000 cars in the UK.
That's not an error. The company that wants to find
the electric vehicle revolution saw it's British sales collapse
by nearly 60%, while it's Chinese rival BYD surged ahead,
quadrupling it's sales and outselling Tesla 3 to one in the
UK. In the same week that this news
broke, Tesla's board awarded Elon Musk a $29 billion pay
package. Let's think about that for just
one moment. Sales down, pay up.
What kind of company does this? This isn't just a story of 1 bad
month or one big payday. It's a look inside Tesla's
warped reality, where the usual rules don't apply fundamental
spend and executive pay floats ever upward, regardless of
results. Defenders will argue that Musk's
latest award is partly retroactive, compensating him
for a previous $56 billion package struck down by the
Delaware court. But the timing and the scale of
this new pay grant raise questions about how Tesla's
board defines success. As competitors gain ground,
lawsuits pile up and executives flee, Tesla's stock remains
surprisingly stable. That stability might suggest
investor confidence, or at least indifference.
But if you look beneath the surface, there are growing signs
of dissatisfaction, shareholder lawsuits, governance critiques,
and growing scrutiny from regulators.
Let's examine the contradictions at the heart of Tesla's current
moment, the Cybertruck debacle, the boardroom drama, the robo
taxi fantasy, and the growing tension between Musk's ambitions
and Tesla's realities. We'll look at how Elon Musk's
sprawling empire, now including a separate AI company that some
are accusing of siphoning talent and resources away from Tesla,
raises serious governance questions.
And we'll ask whether Tesla should still be considered a
growth company or if it's just a cult stock with a fading product
line up and ACEO who's always on to the next hot thing.
First, we should look at the numbers.
Tesla's sales are falling almost everywhere, and not just
slightly. In the UK, July registrations
dropped 60% year over year. In Germany they fell 55%, in
Sweden a staggering 86%, and in Australia they've reported the
biggest sales decline of any mainstream brand in the country.
Across Europe, Tesla has posted 5 consecutive months of decline,
and global sales for the full year of 2024 were also down.
BYD, meanwhile, is surging. It's now the world's top EV
seller, having overtaken Tesla in both the unit sales and
revenue. It's dominance is no longer
confined to just China or Europe, it's global, and BYD has
achieved this despite being effectively barred from the US
market for 100%. Tariffs imposed by both the
Trump and Biden administrations make selling competitively
priced cars nearly impossible. In China, Tesla sold just under
70,000 vehicles in July, down 8.4% year over year and
continuing a nine month downward trend.
The Model Y, once Tesla's crown jewel, which they confusingly
claim is an SUV for tax purposes when it's clearly a compact car,
is losing ground to local competitors.
Even a refreshed version hasn't reversed the slide.
In the United States, Tesla sales may be worse than they
initially appear, while Cox Automotive estimated an 8.6%
decline in the first quarter. More accurate registration
ministration based analysis done by Fred Lampert at Electric
suggests that the real drop is closer to 15% in California,
which accounts for nearly 40% of Tesla's U.S. sales.
Second quarter deliveries fell 21% year over year, marking the
seventh straight quarter of decline.
This means that sales in California were declining well
before Elon Musk got involved in politics.
To top it off, Tesla is now facing a lawsuit from the
California Department of Motor Vehicles over false advertising
of its Autopilot and Full Self Driving features, potentially
threatening its ability to sell cars in the state.
Globally, Tesla reported almost 340,000 deliveries in the first
quarter, but inventory levels are rising and demand appears to
be softening. Despite a recent facelift, Tesla
has no backlog for its new new Model Y, and analysts are
questioning whether Tesla can grow its sales at all this year
or next. The cyber truck, which was once
typed as Tesla's boldest innovation, has quickly become
its weakest link. Sales plunged over 50% year on
year in the second quarter and the truck has been plagued by
recalls, breakdowns and ridicule, with even loyal fans
questioning its viability. Earlier this week, Tesla's board
awarded Elon Musk 96,000,000 shares, which are worth around
$29 billion, a package which the company framed as being a
forward-looking incentive to retain and refocus Musk, who has
threatened to leave the company unless he's given more control
over it. This package makes him the
highest paid CEO in history. To put his pay in context, the
second highest CEO pay package in history was awarded to
Stephen Schwarzman, the Co founder of Blackstone, who
received $1.39 billion in total compensation in 2008.
This payout was largely due to Blackstone's IPO that year and
Schwarzman's equity stake. It happened during a year of
strong performance despite the broader market turmoil.
Musk's $30 billion pay package is not only more than 20 times
larger than Schwartzman's, but it comes at a time when Tesla's
fundamentals are weakening, not improving.
Quartz put together a slideshow of the 11 other highest CEO
payouts in history after Elon Musks, and only two of these pay
packages came to more than a billion dollars.
Amusingly, a number of the companies with the highest paid
CEO's in history were either unprofitable or barely
profitable. Musk Taipei stands in stark
contrast to other iconic founders.
Figures like Bill Gates, Warren Buffett, Jeff Bezos and Mark
Zuckerberg have historically taken modest salaries or none at
all and relied on their ownership stakes in the
businesses that they founded for ongoing motivation.
Buffett famously paid himself $100,000 per year, while
Zuckerberg has taken a $1.00 a year salary since 2013.
This compensation model reflects A broader norm among founders,
who are typically motivated by equity rather than paychecks.
Venture capitalists often view modest salaries as being a
signal of a founders confidence in their business and commitment
to long term growth. In contrast to this, Elon Musk,
despite being Tesla's largest shareholder, has repeatedly
demanded additional equity based compensation, even threatening
to leave the company if not granted more control.
His $29 billion pay package stands out not just for its
size, but for its departure from founder norms.
Tesla's board have described this package as being a critical
first step to energize and focus Musk.
Now, I'm not sure what the following steps will be, but the
award increases Musk's stake in Tesla from under 13% to about
16% of the company. And the only requirement it puts
on him is that he has to stay in a senior leadership role at
Tesla for two more years. There's no requirement that he
devote any more time to the company.
He just can't quit. Musk's overturned 2018
compensation package had entitled him to 20% of the
company, and he has said that he needs to own at least 25% if
he's going to advance Tesla's artificial intelligence and
robotics capabilities. And those are the most important
buzzwords of 2025. He says the 25% would be enough
control to prevent an activist investor from ousting him like
he did to to the management of Twitter a few years ago.
Despite his claim that he's not interested in wealth and only
wants control of Tesla, which will allow him to save humanity.
In recent years, Musk has sold billions of dollars worth of
Tesla stock. He managed to sell 7 1/2 billion
dollars worth of Tesla shares near it's all time high in late
2022, right before a sales report that sent the price of
the stock plunging. His new pay package is being
pitched to Tesla investors as a contingency plan if the $56
billion award from 2018, which was struck down by a Delaware
court for being excessive and poorly disclosed.
He's reinstated. Upon appeal, he'll forgo the new
shares. But if the court rejects Tesla's
appeal, Musk will still walk away with the largest pay
package in corporate history. As a critical first step, it's
worth noting that Elon Musk's overturned $56 billion
compensation package is worth more than Tesla's entire
accumulated net income since inception.
As of early 2025, Tesla had earned approximately $38.6
billion in total net profit since going public, meaning that
Musk's $58 billion pay package would have represented about 1.6
times the company's lifetime earnings.
The more modest $29 billion pay package is less than 80% of
Tesla's total net profits since going public, meaning that
something is left over for the other shareholders.
The logic behind Musk's award is unconventional.
As The Economist puts it, under the Elon Musk theory of pay, the
worst Tesla performs, the more it's boss ought to earn.
Musk's control over Tesla is seen as essential not because of
operational success, he did after all, designed a
Cybertruck, but because of the Pixie dust he brings.
Promises of robotaxi's humanoid robots and an AI powered future.
With Tesla's fundamentals weakening its valuation
increasingly depends on Musk's futurism.
In this topsy turvy incentive structure, declining performance
seems to justify greater rewards.
Tesla's board, reduced to a two person special committee,
approved the pay deal amid falling sales, rising
competition and reputational damage from Musk's political
entanglements and awkward waves. Shareholders have largely gone
along with this, even voting to reincorporate the company in
Texas, where investor lawsuits are harder to pursue.
Analysts and economists are divided on whether Musk's pay
reflects a competitive market for rare talent or a case of
rent extraction enabled by a weak board.
One thing is clear, however. Musk doesn't need to walk across
the street to a competitor to negotiate a raise.
He just needs to switch his focus from Tesla to SpaceX, XAI
or Twitter, which he calls X, or that brain implant company that
kills monkeys and a variety of other animals.
With Tesla's NVIDIA chips having been diverted to XAI, the
boundaries between his companies are blurring fast.
Tesla's decision to reincorporate in Texas away from
Delaware's more shareholder friendly courts underscores the
board's willingness to reshape legal frameworks to accommodate
Elon Musk's compensation demands.
As Matt Levine pointed out earlier this week, this move was
not just symbolic. It was strategic, designed to
avoid the Delaware courts that invalidated Musk's 2018 pay
package due to conflicts of interest on the board and
inadequate shareholder disclosures.
Levine points out that the funniest part of Tesla's filing
is their section on accounting consequences.
And let's be serious, it's rare to ever describe something
labeled accounting consequences as being funny.
But according to Tesla, they don't have to recognize any
compensation expense when they issue Elon Musk the largest pay
package in history because there's a performance condition
attached to receiving the award and they're claiming that there
there is essentially no chance of Musk ever getting the shares.
Thus they can value the compensation package at 0.
This is a bit of a weird claim as the new options are meant to
replace the 2018 options and there are no operational or
financial targets tied to the payout whatsoever.
The stock price doesn't have to rise, no extra cars have to be
sold, they don't have to get their robo taxis working or
achieve AGI. The only thing that Musk
actually has to do to get the award is to serve continuously
in a senior leadership role at Tesla during the two year
vesting term. There are no requirements other
than that he can't quit. He doesn't have to devote any
fixed portion of his time to the company.
In fact, his presence can be entirely symbolic.
He just can't announce that he's leaving.
So do they really think that there's no chance that he'll
stick around for two more years? Well, Levine points out that the
other condition tied to the award is that it'll be
immediately forfeited and returned to the company if,
prior to vesting, there's a final judgement order or
decision of the Delaware court with respect to Tornado versus
Elon Musk, that results in Musk being able to exercise in full
the performance based stock option award he was granted in
January 2018. So they either think that
there's no chance that the Delaware judgment is not going
to be overturned upon appeal, or they think that there's no
chance that Musk stays on for two more years.
This accounting treatment of the world's largest corporate pay
package in history has drawn sharp criticism from corporate
governance specialists and accounting experts, who argue
that the company's assertion lacks independent accounting
validation and may be misleading to shareholders.
A Columbia Business School paper from last year estimated that
reinstating the original award or issuing a similar one should
trigger an accounting charge of 20, 25 to $51 billion.
These critiques suggest the Tesla's board may be downplaying
the financial impact of Musk's compensation, which raises
deeper concerns about the company's transparency and
governance. The behavior of Tesla's board is
emblematic of a broader crisis in corporate governance, which
The Economist recently described as the fecklessness of American
boards. They argue that directors are
often either too beholden to imperial CE OS like Elon Musk,
or too disengaged to challenge them.
In the article, they say that Intel and Tesla represent two
ways in which boards fail in their duty to represent
investors and hold management to account.
At companies like Tesla, directors find themselves at the
mercy of a domineering figure and have a powerful incentive to
humor that person's whims, even if it might mean ignoring their
fiduciary obligations to shareholders.
Equally, they say that at firms like Intel, thoroughly
independent directors may lack enough of an incentive to care.
Either way, the result looks like feckless passivity.
Tesla's internal turbulence is not limited to its boardroom
decisions. It's increasingly reflected in
the exodus of top talent and insider stock sales.
According to Mint, over the last year at least 15 senior
executives across Musk's companies have resigned,
including Tesla's head of battery architecture, the
director of HR, and the leader of its humanoid robot program.
These departures suggest more than routine turnover, they
point to a growing unease with Musk's leadership and the
strategic direction of the company.
Meanwhile, Tesla board members have been quietly cashing out.
Robin Denholm, the board chair, has sold over $117 million worth
of shares this year alone, while other insiders including Musk's
brother Kimball and long time ally James Murdoch have
offloaded 10 10s of 1,000,000 more.
Though some of these sales were pre arranged, their timing amid
falling sales lawsuits and reputational damage sends a
clear signal that those closest to Tesla's leadership are
hedging their bets. As University of Florida
professor Jay Ritter put it, whenever insiders, including
directors, are selling shares, it's not a positive signal.
Musk's simultaneous leadership of multiple ventures, including
Tesla, SpaceX, Neuralink, X Corp, and now X AI, raises
serious questions about divided attention and resource
allocation. Well, Tesla has long marketed
itself as an AI company. Musk's decision to launch XAI as
a separate venture, reportedly diverting hard to acquire NVIDIA
chips and talent from Tesla, suggests a conflict of interest.
Investors who have been claiming for some time that Tesla is an
AI company are left wondering whether Tesla's AI ambitions are
being sidelined in favor of Musk's newer ventures.
By going along without setting any boundaries or being
transparent, the board shows that it's not really in charge.
Tesla is facing a long list of headwinds that threaten its
profitability, reputation, and long term growth.
Donald Trump's cancellation of EV and renewable energy
incentives has stripped Tesla of billions in regulatory credit
revenue. He has also added hundreds of
millions of dollars in tariff related costs to the company.
Elon Musk warned of rough quarters ahead earlier this year
as the company struggled to deliver vehicles before
incentives expired, and it faces uncertainty over future demand.
Tesla's aging model line up and decision to abandon a lower cost
model too in favor of robo taxis, which in no way appear to
be functional and humanoid robots for which there's
questionable demand, have left it extremely vulnerable to
competition from both traditional automakers and
aggressive Chinese entrants. As the Economist note, Tesla has
become a reluctant car maker, relying heavily on just two
models while rivals offer broader portfolios.
Musk's political entanglements and erratic leadership have
further alienated customers, with protests, vandalism and
even anti Musk bumper stickers becoming symbols of discontent.
The company's valuation, once buoyed by Musk's Pixie dust, now
looks increasingly detached from fundamentals.
How many quarters of slowing growth are needed for investors
to notice that it's not really a growth stock?
Tesla's troubles are not occurring in a vacuum.
Around the world, governments are reassessing the cost and
pace of their green transitions. In Britain, soaring energy bills
have shattered the One Solid Net 0 consensus.
While gas prices remain a major driver, the cost of upgrading
the electricity grid, new pylons, wires and balancing
mechanisms to accommodate renewables are increasingly
showing up in household electricity bills.
According to The Economist, these network and subsidy costs
have contributed nearly 2/3 as much to the rise in real
electricity prices as wholesale energy costs have since 2019.
Across Europe, even centrist leaders are beginning to echo
hard right Net 0 skepticism, questioning whether climate
action is worth the economic pain.
For Tesla, this shift is deeply consequential.
The company has long benefited from generous subsidies,
regulatory credits, and the political environment that
incentivized electrification. But as the Financial Times
reports, Donald Trump's rollback of EV incentives and emissions
penalties has already slashed Tesla's revenue and added
hundreds of millions in tariff related costs.
If the global mood continues to sour on green investment, Tesla
may find itself not only battling competitors and
internal dysfunction, but also a shrinking policy tailwind that
wouldn't help justify its lofty valuation, according to the LA
Times. At the heart of Tesla's current
legal and reputational challenges lies a simple but
consequential question. Can Elon Musk be trusted?
His tendency to exaggerate, whether about autopilot, full
self driving or the timeline for robo taxis, has drawn increasing
scrutiny from regulators, courts and consumers.
Some of his more ridiculous ideas, like the Hyperloop, have
been quietly abandoned. Simultaneously, in California,
the state's Department of Motor Vehicles is arguing that Tesla
misled consumers by branding its features as Autopilot and Full
Self Driving, despite their limitations.
Musk has been warned by federal regulators to stop making public
statements that overstate the capabilities of these systems,
yet he continues to do so. With Tesla's safety reputation
under fire and punitive damage is looming, the issue of Musk's
credibility is no longer just a matter of style.
It's a material risk to the company's future.
Tesla's robo taxi ambitions have long been a pillar of Elon
Musk's growth narrative, but they now sit at the center of a
deepening crisis of governance and investor trust.
Elon Musk first introduced the idea that Tesla vehicles could
operate as autonomous robo taxis when not in use by their owners
in 2016. On what he dubbed Autonomy Day
in 2019, he claimed that Tesla would have 1,000,000 robo taxis
on the road next year enabled through an Over the Air update.
His 2019 claim that his cars would soon be able to earn more
for their owners than they cost in a year, and that they would
be appreciating assets is what first set the stock price on
fire. The claim that full autonomous
driving was coming next year was repeated annually, helping to
sustain Tesla's tech stock like valuation, despite the
technology never working as described.
Central to the robotaxi story was a 2016 promotional video set
to the Rolling Stone song painted black, which purported
to show a Tesla driving itself. The video claimed that the
person sitting in the driver's seat was only there for legal
reasons, that he wasn't doing anything, and that the car was
driving itself. It turns out that he might have
been acting as a crash test dummy, as former employees have
since testified that the video was faked, the route was pre
mapped, drivers intervened repeatedly, and the car crashed
off camera. Tesla is now facing a
shareholder lawsuit alleging securities fraud, accusing MASK
and the company of concealing testing data and overstating the
safety of its autonomous technology.
The suit follows a failed public robo taxi test in Austin, where
vehicles were seen speeding, braking erratically and dropping
passengers in unsafe locations. This event wiped $68 billion off
Tesla's market cap in just two days.
Regulators appear to be circling, courts are weighing
liability, and the gap between Musk's promises and Tesla's
capabilities is no longer just a technical issue.
It's a legal and financial reckoning For a board already
criticized for its passivity and entanglements.
The robotaxi saga is a case study in the cost of unchanged
tech leadership and the erosion of shareholder confidence.
Tesla's pivot towards robo taxis is not just a technological
gamble, it's a strategic lifeline.
With their sales declining and their car line up aging, Elon
Musk has staked the company's future on autonomous ride
hailing. He once again is promising that
thousands of cyber cabs devoid of steering wheels or pedals
will be on US roads by next year.
The problem is that Tesla's Full Self Driving system remains a
Level 2 technology requiring constant driver oversight.
It has fallen far behind rivals like Waymo and Zoox, which
operate Level 4 vehicles. Safety concerns are mounting.
Tesla was recently ordered to pay $243,000,000 in damages over
a fatal crash involving Autopilot, and federal data
contradicts Musk's public claims that no self driving Tesla has
ever crashed. Trials in Austin and San
Francisco have faced regulatory hurdles and Tesla has yet to
apply for permits for a fully autonomous service.
Unlike competitors who have invested in costly sensor suites
and purpose built vehicles, Tesla relies solely on cameras
and plans to Crowdsource it's fleet by an Airbnb style model
from Tesla owners who presumably are happy to have their car
return after a busy night out smelling like a phone booth.
Uber, who have flirted with the idea of robo taxis for years, is
hedging its bets by partnering with multiple autonomous vehicle
firms including Waymo and We Ride.
Tesla, on the other hand, is planning on going it alone.
As The Economist note, the regulatory landscape for
autonomous vehicles is fragmented, public trust is
fragile, and profitability remains elusive.
Unless Tesla can quickly prove its technology is safe,
scalable, and commercially viable, it's robo taxi dream may
remain just that, a dream. Despite declining sales, legal
setbacks, and governance concerns, Tesla stock has shown
surprising resilience. While it's underperformed the
stock market year to date, it remains one of the better
performing Magnificent 7 stocks on a one year basis.
As Robert Armstrong noted in a recent column about the
Magnificent 7, the market's message has been quite simple.
Gross sales and the stock goes up.
Tesla's problem, he points out, is that it hasn't.
Revenue growth has stalled, deliveries are down, and it's
core lineup is aging. Yet the stock continues to trade
a tech like multiples over 95 times estimated 2025 earnings
because investors remain fixated on Elon Musk's promises of
future growth, particularly around robo taxis, robo robots,
and AI. These narratives have helped
sustain Tesla's valuation even as its fundamentals weaken.
The company's promotional tactics, including the painted
black video that misrepresented full Self driving capabilities,
have blurred the line between innovation and hype.
With lawsuits alleging securities fraud and regulators
scrutinizing safety claims, the question is no longer just
whether Tesla can grow, but whether it can be trusted at
all. For now, the market seems
willing to suspend disbelief. But as Armstrong's analysis
suggests, without real sales growth, even the most compelling
story eventually loses its power.
Tesla's story is no longer just about the technology products
that it insists are coming next year.
It's about governance, trust and the durability of belief.
Sales are declining, lawsuits are mounting and the robo taxi
dream remains elusive. Teslas valuation doesn't respond
to earnings or delivery numbers. It responds to Musk spell over a
group of passionate investors. That spell has been reinforced
by years of government support, from Obama era loans to Trump
era tax credits, and it now faces real tests as political
alliances fray and regulatory scrutiny intensifies.
The shareholder lawsuits and the recent verdict in Florida all
point to a widening gap between promise and reality.
Tesla may still be considered a growth company by some, but the
growth now lies in narrative, not numbers.
Whether that narrative can survive further erosion of trust
among regulators, investors, and the public is the question that
will define Tesla's next chapter.
Thanks again for tuning into this week's podcast.
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