[Music] Hi everybody, I'm Britney Lubis, a breaking news reporter here at Forbes. Joining me now is Alan Owensman, senior editor and author of the current climate newsletter. Alan, thanks so much for joining me. Hi Britney, good to be with you. I want to read your latest reporting headline. You write this, Elon Musk is running out of ideas to save Tesla. And in our conversations within really the past weeks, you've said things are bad at Tesla. In your reporting last week, the company posted its worst quarterly results in four years. So, dive a little bit into the numbers for us to start off the conversation. Explain exactly the state Tesla is currently in. Well, um I'll start with the headline for the story that Elon's out of ideas. And that might seem counterintuitive to some people because he is announcing some new things. Those include an um a robo taxi uh program that is supposed to kick off in Austin next month. um the potential for Tesla to be a huge AI play at some point and also humanoid uh robotics uh their optimist program where they're building human style robot workers. So one might think those are ideas and I would say those are ideas and that is all that they are at this point. Meaning they're not businesses. There is no way to model and project earnings for any of these things. Elon throws a lot of numbers out saying robots will be a trillion dollar business. Okay, maybe. Um, but if I'm an analyst, if I'm an equity analyst and I'm trying to bake in what are the things I know in terms of existing businesses and trying to project forward earnings, I can't model those uh that, you know, it's what's called hopeium. Like, you know, one might one might wish that these things come true. Um, but right now they're not real concrete businesses. So, we have to kind of set those aside. When I say he's out of ideas, what I'm talking about is the core business of Tesla. And it boils down really to three things. Uh, electric vehicles, battery and energy storage systems, and charging services both for its own customers and for other companies who use Tesla chargers. that accounts for something like 95 or 96% of all of its revenue. So those are really the key things. And if you look at each of those three areas, this is where there are problems. And that's why I say he's his ideas don't seem to extend to the core businesses. And that's really the rub right now. Um looking at where Tesla is, as you mentioned, uh Q1 was very bad. Um you know, a 71% in in net income will get your attention. that that's a that's a precipitous drop. Uh the bigger issue is um the brand and Elon are becoming toxic for many people. So Elon leaving uh day-to-day Doge activities and coming back to Tesla sort of full-time, but remember he's also still doing SpaceX, XAI, Neuralink, the Boring Company, uh maybe other companies he's he's he's planning to throw out there. So, when you say he's back full-time, well, is, you know, he's he's sort of back. So, um, the business itself, what we need to see from Tesla is some some some excitement and some new products on the electric vehicle side. And unfortunately, the cupboard's kind of bare right now. So, coming into Q2, there's no indication that the problems that dog Tesla in the first quarter have been solved. and those have to do simply with selling electric cars. The bigger issue also relates to Tesla's energy storage business. And this is a critical one because that was a bright spot in the first quarter. It it was a a booming growth area. Um, a lot of those orders are for things like utilities that order largecale battery systems to store uh renewable energy. Uh Tesla has shifted to using um what's called an LFP or um lithium iron phosphate uh battery cell. Those come from China. Well, currently because of the tariffs that that went into effect at the beginning of uh Q2, those cells now are out of the range too expensive. there's an additional 145% markup which means there's there's no economic incentive to use them. Uh they're not manufactured domestically at least in quantity. So the battery business that was very um encouraging for Tesla in in in Q1 doesn't look that great in Q2. So wow. Okay. Laundry list of problems here. Let's first start with Elon as the CEO. So he's said that he's going to eventually step away from Doge. If is there any indication that when he does step away when he is a more present CEO that Tesla will be his top priority because as you said he has other companies he has enough jobs for about 10 people Neurolink SpaceX the Boring Company just to name a few and if he does become a more hands-on CEO is that enough to turn things around at Tesla because there's almost like a double-edged sword problem here with Elon Musk as the CEO. people want him to spend more time at the brand, but he's also toxic for the brand. So, what does that look like? Should he come back in a more hands-on approach? Again, I I would go back to a conversation we had uh previously that honestly at this point, the best thing for Tesla would be a management change to bring in a fresh face. Um Elon certainly has done quite a job getting Tesla up and running, building out the company. Um he has other interests at this point. So Tesla is competing for his time. That's never a great thing where one of many companies, you know, is saying, "Pay attention to me. Focus on me." Um, and where I see real evidence of that again is the lack of fresh new product. What Tesla is working on right now is a refreshed version of the Model Y that's hitting the market now and then promises of lowerc cost versions of both the Model Y and the Model 3, which may find some sales, but um doing decontented or cheaper versions of existing cars typically in the auto industry doesn't attract a lot of new business. If you want a cheaper Tesla, just buy a used one. um you can get a used one for not much right now. So you have a new product, a new decontented product that may cost the same as a used Tesla with much more range and more features. So that that sort of undercuts that strategy. Um, in the piece uh that you referenced uh that we we we put out recently, um, one Tesla investor who's been a longtime Tesla fan and more recently is a critic of of Elon thinks the simplest uh, solution would have been uh, that Tesla put back what was called the Model 2. Uh, it was a lowerpriced project that was in development for years. It was shown last fall when uh Elon unveiled the Tesla Cyber Cab at Universal Studios here in Los Angeles. Um it's a twodoor smaller model. Uh and it looks like something that could be very interesting if it were sold as a new standalone Tesla product, but what he said is um this will only be sold as a robo taxi. Uh it'll cost about 26 or $27,000. But what was a little unclear is is this a is this a commercial vehicle for individuals or is this more of a fleet vehicle for people that want to operate or companies that want to operate robo taxi fleets. A lot of that's very murky. What um what Ross Gerber, the the Tesla investor said was, "Look, just sell it as a straightup electric car. There's nothing like it in the market right now. It's a new niche. Um it would be affordably priced. There you go." And he's right. The simplest thing uh that Tesla could do is just come out with some compelling new products. Cybert truck came out a year and a half ago. It's not been a great seller. It's very expensive. It's too nichy. They are bringing out the semi the Tesla semitr. Again, uh the semi market, the class 8 commercial vehicle market is small. So even if Tesla begins selling uh this new electric semitr uh it's not going to add that much to the bottom line. Where you get that is with these mass selling mass market EVs. Model Y is the best example of that. That's been a home run for Tesla. An unquestioned home run. The Model 3 also a great seller. So logically do another um mass market highly appealing vehicle. Problem solved. But that's not apparently what they're doing right now. It doesn't seem like that's what they're doing. Seems like Elon is throwing out these pie in the sky ideas with AI, robo taxi, humanoid robots. And as you said, those are just ideas. Has Elon in any way acknowledged the issues and the dismal sale numbers that Tesla's facing right now? And how has he acknowledged them? If so, um, he acknowledged that the numbers weren't great. um and he acknowledged some of the blowback against him. However, during the earnings call last week, he blamed it on uh paid protesters and claimed that many of the people that have been at these um anti-Tesla, anti- Elon rallies are disgruntled government workers that have been cut by Doge. Uh I can assure you that these are not paid people. I've interviewed protesters both here in LA um and in Southern California and these are people that are just angry and some of them are former uh Tesla uh owners who've dumped their cars or are planning to get rid of them. So, um I don't think he's acknowledging um the reality of the situation that it boils down to him. And we also have to point out this began before Doge. Elon's decline has been going on for some time. It really started when he bought Twitter. uh in 2022. Um he's always been very vocal on social media and and and unrestrained um to his own detriment. He's occasionally been accused of making not just insensitive comments, but some that have been made seen as racist, misogynistic, anti-trans, anti-semitic even at times. Um that's not been good for his reputation. And there's a reason why most CEOs don't do that. Um you know, he he plays by different rules. So, I'm not sure he recognizes the scope of of the situation right now. Um, I would be shocked if he announced that he was stepping away. Um, I I don't expect it to happen. U, I do think it would be a positive for the brand. I think you have Tesla loyalists that would not like it, but I think you'd have a lot of other investors that would like to see uh the brand under under fresher, different, less controversial management. I think that would be a net positive. And I think the the sadness of all this is u without question Tesla has been the pioneer in electric vehicle sales. Um you can't take that away from the company. It really jumpst started a non-existent market several years ago. Um and it has had this great opportunity to grow uh the brand uh meaningfully and um at least as far as EV sales go right now. They've topped out. Sales declined in 2023. They dropped in 2024 and the expectations are they're going to drop uh more sharply in 2025. So, have we seen the peak of Tesla's sales as an EV player? We probably have. Based on what we know right now, there's no indication that the sales decline for Tesla electric vehicles is going to be reversed. I don't know that he acknowledges that. What he would say is that's okay because we're going to have these other businesses that'll make even more money and everything will be fine. That's really incredible that you're saying that because Tesla was really on the cutting edge when it came to EVs and it seems like the rules that Elon Musk is playing by are really hurting his bottom line. And you and I have talked about the different camps of problems Tesla finds itself in. The one being the brand problem with Elon Musk being so linked to the product to the product issue with Cybert trucks having dismal sales and the company having an issue selling electric vehicle vehicles as you said and the third being that now there are viable competitors in this space. What problem do you think is a the most serious and b needs to be addressed first? Um I I think on the product side you know it should be all hands on deck. Uh I I I I think they should try to come out as quickly as possible with a fresh new model and especially something in a new segment. Um especially because we know there are going to be lowerc cost US competitors. Globally there they there already are many uh lowerc cost options to Tesla. We don't see them in the United States because they're mainly Chinese. Um there's going to be a very compelling uh domestic competitor coming later this year and that will be the third generation Bolt from General Motors. Um, it's going to be fully redesigned and it's probably going to come in at that sort of sub $30,000 price point with maybe 300 miles of range and nice utility in in a smaller vehicle that'll sell great in markets in like California here in LA, places like that as an urban a good urban EV. Um, right now Tesla really doesn't have anything new in that space. this again the the the Model 2/Cybercab vehicle would have kind of slotted into that, but they're not bringing it out as a standalone product. That's a that's a mistake. I I think an obvious one in the auto business, you know, the simplest fix is new product. That that's it. It ain't rocket science. You know, rocket science is SpaceX, but but when it comes to Tesla, it's the car business. And it's like just just come out with something new. um not not you know lightly refreshed versions of existing product or decontented cheaper version of of existing product um especially when that means you're going to be competing with your own used you know used models and this is a problem now that's not unique to Tesla and that's tariffs tariffs affected Elon Musk's net worth when they were unveiled and now they're hitting Tesla too talk to us about the impact of President Trump's tariffs on the company well Um uh Tesla is fairly uh heavily uh domestically sourced. So it's a little more insulated. It doesn't import any models it sells here, but uh especially things like steel and aluminum uh that comes from Canada and some uh some grades come from overseas. Uh it would definitely be affected by that. It uses electronics and components supplied by Japanese and Korean companies. Um those will be affected and and those will get more expensive. I think they just announced um you know they raised prices in Canada uh Tesla did um just this week on their their products there. I don't know if that's going to matter because you know Canada's already had kind of a boycott on American products and specifically Tesla. So I'm not sure raising the prices at this point is going to matter. Um so that's been a real problem. The the bigger um impact though that I I think you'll see will be um on the battery business, the energy storage business. Again, that reliance on Chinese cells uh that Tesla had built up. Last year they announced a partnership with CL of China, which is the world's biggest maker of EV batteries. and they were planning not just to license um buy cells from from CL but also license the technology and set up domestic manufacturing in Nevada of uh these LFP cells uh from from CL. uh that project is not complete and it's not going to happen now because of the tariffs because while Trump uh may dial back tariffs selectively in some areas like on areas like auto parts and on some countries the Chinese tariffs are not changing at this point. They're 145%. So what that means is Tesla's no longer going to have access to cheap imported uh Chinese cells nor is it was it able to complete um installation of manufacturing equipment to make them domestically. So what that tells me is their energy storage business is going to get hammered in Q2. Uh and again it was a bright spot. There were two bright spots for Tesla in Q1 and that was the energy storage business. Uh and the second one was was ZEV credits or or regulatory credits selling pollution credits to uh to other automakers. It's unclear uh in the case of the credits what that market's going to look like in Q2. Um did they move some of those credits ahead early to book them uh in Q1 that they could have held on to to you know in case they needed them in Q2? We don't know. But that business is always kind of unpredictable how big that's going to be. the battery energy storage business is is going to get hurt. So those two areas don't look good. And if we if their sales trend remains as it has been for the last few months on the EV side, um Q2 is is not going to be a good quarter. Well, that doesn't sound good. The sale, if the sales trend is looking like it has been, not good for Tesla. Bleak outlook there. Are there any bright spots that you're looking at for the rest of Q2 and possibly beyond throughout the rest of 2025? Um, uh, that's a tough one. Uh, honestly, right now, based on everything we know, no, June is going to be interesting because they're launching this robo taxi uh, program in um, in Austin, Texas, and it's going to start small, 10 to 20 vehicles. Um, some of the reporting on that however does raise concerns. Uh, there was a piece on Friday by Business Insider pointing out based on interviews with people who've worked on the testing of that program that maybe things are being a little bit rushed. Uh, that they're trying there's an urgency to meet a June deadline. Uh, that's a little concerning if if true because this is a system that where safety has to be absolutely the top priority. people can get killed, other vehicles, you know, you can have accidents and collisions with other vehicles. Um, you don't want to rush something like this. Uh, the contrast would be the Whimo program, which has gone on for years, 16 years they've been working on it, and only within the last 18 months or so have did they really begin to ramp up uh their robo taxi business beyond say Phoenix. um they were very cautious and they were, you know, wanting to avoid, you know, serious accidents, fatal accidents, accidents involving injuries. They've been very fortunate so far in that they haven't had any. Um you never want to hear someone's rushing anything or doing anything with urgency when it involves uh an autonomous vehicle where there's no human driver at the wheel. You want to make sure that that system is is is is as rock solid as possible before you launch. So I think if that launch goes well and smooth and there are no accidents in June and they grow it a little bit in July and they grow it a little bit more in August, that could be a positive sign. Uh what we don't know though is is it actually a revenue generator and is it profitable? Because what we do understand is that Tesla's going to have a lot of back-end people on that system. uh remote operators, people monitoring the system. Um I can give you a robo taxi ride, but if I have 10 people watching the car and I'm paying those 10 people, is that a is that a money-making service? You know, probably not. To your point there, safety is really paramount when it comes to that type of vehicle. And aside from techy cities like Austin, like San Francisco, is there widespread appetite for something like a robo taxi? I think there is I mean I I've been really surprised um here in LA they they launched and they opened to the public about almost a year ago in Los Angeles and uh it's it's um it's been growing section by section. They're still only in a portion of the city. Um what I've been surprised about is how quickly it's both normalized and people really like it. Um, you know, I have friends who use it quite regularly now when they go out to dinner or something just and they prefer it to a standard Uber. There's a sense of more privacy, you know, even though you're probably being monitored because there are cameras inside the vehicle. Um, there's no human driver in the front. And so, the feeling is there is more of a feeling of privacy and it is a more premium experience. Uh, the vehicles are immaculate. There are these nice uh Jaguar IPACE electric vehicles. It's kind of a comfortable plush interior. It's probably about 10% more expensive than your Uber ride even with the tip. Um but it's a very pleasant experience. So the surprising thing is how quickly people have adapted to it. The it goes from being like, oh gee whiz for, you know, the first ride or two to something that people very quickly uh grow comfortable with. And and that's been very very interesting. I I'll be fascinated. I'm I'm in Los Angeles. In 2028, uh we have the summer Olympics that'll be back in LA again. I'm certain that a big chunk of that there'll be robo taxis all over LA helping people move around from event to event because it's going to be the no car Olympics. And what that means is you you're not going to be able to drive your own car because there's not going to be any parking. Robo taxis perfectly fine. Uh drop off and pickup, great, no problem. I mean, that's incredible. I'll see. I'm in New York, so I'll see if robo taxis take over here. But I'm curious what exactly you're looking out for next with Tesla because for weeks now, you've been reporting grim outlook after bleak outlook for Tesla. What specifically is on your radar next? Well, I I I guess I I'll be interested to see how long investors stick with the story. um because of past success um and and this is always in earnings reports and and and and in contracts. You know, past performance is no indicator of future performance. Unfortunately, I think a disproportionate number of people who buy into Tesla assume Elon can work miracles one after the other. And he has an incredible track record. What he did with Tesla is is historic in the automotive industry. What he did with SpaceX is historic in aerospace. He's had real successes to point to and that's in some cases it's a double-edged sword because people think oh well he can do it again. There are people like me who've been watching the story for a very long time and it's like that's all true but for every big success there have been a number of failures that never happened and so people tend to forget all the things he claimed he was going to do or that Tesla was going to do that never materialized. And and so, you know, the the the guidance with with with Tesla and Elon is is, you know, use your best judgment because um many of the things he predicts or promises um are aspirational. Uh but they're not necessarily things that are always going to happen. I think when he says them, he believes it's going to happen. Uh but that's just not been the case. whether it's been putting solar roofs on homes uh at at at low affordable cost, battery swapping, selling 20 million EVs a year. I mean, the number of targets that he's put out there and missed or that they were going to have robo taxis in 2019 and then it was 2020 and then it was 2021 and now it's 2025. Okay, maybe they'll have some. But um you know, one would think at this point that that people would would always be cautious in in um counting on many of these things to materialize uh based on on on past history. Um so what I'm curious to see is at some point do do more investors begin to say, okay, you need to focus on the core business. Tesla needs better EVs, new EVs. You need to focus on the battery business. expand your charging services, add more charging stations and charge Ford customers and General Motors customers and Lucid and Rivian customers to charge at your stations. That's a business. That's a really good business. Um, build those out, make those better. Those are great. Uh, if I'm an investor, I'd love to see all of those things. Um, I I'm not interested as an investor in maybe you'll have robo taxis, maybe you'll have humanoid robots, maybe you'll have AI services until it's a concrete business. Um I you know I think one should be somewhat skeptical. Um and so I I guess I mean this is a it's not something I'm looking forward to but one of the things I keep waiting to see is will there be a broader sense uh from the investing community that Tesla you know you need to to you know don't just say it prove it. Uh show me that you can do these things deliver on these things. If you can I will reward you by buying your sock. um if you continually make promises that you do not fulfill, perhaps I should be a little more skeptical and uh sit tight for a while. And um you know, he has this ability to command an amazing amount of attention and amazing amount of money from patient investors. I'm not sure that's always rewarded. It certainly has been. I mean, the stock just phenomenal growth over the past few years. Um, at some point though, it seems like you really do have to deliver on all that promise. And, um, I think we're kind of that's 2025 feels like that sort of year. Like, is this a make or break year where he really does have to start delivering on some of this stuff? I think what you're saying it sounds like we are looking at how much runway he has with these patient investors. That's certainly something we will continue to have conversations on. Alan Ownman, per usual, thanks for coming on. Thanks. Good to be with you, Britney.