On April 3, Tesla announced its sales for Q1 2019 and the news was not good, to say the least. The electric vehicle (EV) maker reported selling 63,000 cars in the first three months of this year, a devastating 31 percent drop from Q4 2018.
Interestingly, the company actually beat analyst sales projections for its popular Model 3 sedan. Experts forecasted Tesla selling 50,000 units but ended up delivering 50,900 to customers. However, the brand’s other vehicles, the crossover Model X and Luxury Model S, experienced a 44 percent drop in sales, moving a total of 12,100 cars.
Following the announcement of its weak sales performance, the corporation’s stock dipped by almost 11 percent.
Tesla’s Production and Logistics Issue
Tesla’s disappointing first-quarter sales were due in part to a drop off in consumer demand. However, the company was once again plagued by its inability to deliver vehicles to buyers in a timely fashion. Notably, the company only counts a vehicle as sold after it’s been fabricated and delivered to its new owner.
The brand’s boutique method of operation caused problems this year as it began selling its EVs in Europe and China. The EV maker produced 77,100 cars but only delivered 63,000. As such, the firm failed to deliver 14,100 cars within the first three months of 2019. In Q4 2018, Tesla produced 90,700 vehicles and delivered 86,555, leaving only 4,200 in transit.
Because the company currently only maintains one North American car factory, its ability to fulfill international orders is limited. However, Tesla is actively working to address its output and logistics shortcomings. It’s currently constructing a new production facility in China and is doubling the size of its Nevada Gigafactory.
The Musk Problem
The innovative carmaker’s weak Q1 2019 is not its most pressing issue. CEO Elon Musk is once again taking actions that are hurting the firm he co-founded.
The Securities Exchange Commission (SEC) took Musk to court for supposedly violating a September 2018 consent order. Musk agreed to run tweets that could affect Tesla stock by a lawyer before posting them. The government argued that Musk was in contempt because he tweeted the company will sell 500,000 cars in 2019 when the company only forecasts sales of 360,000 to 400,000.
Ultimately, Judge Alison Nathan declined to make a ruling and urged the executive and the SEC to be reasonable. Nevertheless, the fact Musk is still getting in spats with the government while his company falls behind suggests his priorities are out of whack.
Ars Technica recently published an opinion piece outlining why Musk should no longer serve as Tesla’s chief executive. The site’s argument is that the 48-year-old still has a startup founder’s mindset despite running a major corporation. Indeed, the pugnaciousness and rapid-fire decision making that turned him into a tech industry rock star also make him a worryingly inconsistent leader.
While multinationals need innovative thinking and agility to stay competitive, they also need a steady hand at the helm. Getting in costly and embarrassing Twitter fights and getting high during interviews are unthinkable behavior for most high-level executives. Moreover, as the company is facing new competition in the EV space from Volvo, Audi, Porsche, and Mercedes-Benz this year, it needs thoughtful guidance now more than ever.
Undoubtedly, Tesla would suffer greatly if Musk were forced out of the organization. But it’s clear that while his skills as a technologist make him invaluable, his deficiencies as a CEO make him a liability.