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Elon Musk’s EV Empire Is Crumbling
Of late, Tesla’s cars have come to seem a bit hazardous. Their self-driving features have been linked to hundreds of accidents and more than a dozen deaths. Then, earlier this month, the company recalled its entire fleet of Cybertrucks. A mechanical problem that trapped its gas pedal, as InsideEVs put it, “could potentially turn the stainless steel trapezoid into a 6,800-pound land missile.”Along the way, Tesla—which did not respond to multiple requests for comment—has defended its cars and autopilot software. As of last week, the company told federal regulators that the Cybertruck malfunction had not been linked to any accidents or injuries. But even resolving every safety concern may not stop Tesla’s entire EV business from becoming a hazard. Yesterday afternoon, the world’s most valuable car company released its earnings report for the first quarter of 2024, announcing that its net income had dropped 55 percent from a year ago. On an investor call shortly after, Elon Musk could offer only a vague euphemism to describe what has become an especially disastrous month: His car juggernaut “navigated several unforeseen challenges.” Just in April, Tesla has announced its first drop in sales since 2020, recalled one line of vehicles and reportedly canceled plans for another, and begun mass layoffs. There are still, somehow, six days left for the month to get worse.Whether Musk can sustain his EV empire is now in doubt. He told investors that Tesla’s primary focus is now on AI and self-driving cars. But even if that pivot fails, the company has positioned itself to be on the edge of another, perhaps more crucial part of the green transition: delivering and storing America’s power. Tesla’s EV chargers are ascendant, if not dominant, as are its huge batteries that store renewable energy for homes and even entire neighborhoods. Profits from Tesla’s energy business were up 140 percent compared with the same period last year, and Musk asserted yesterday that the division will continue to grow “significantly faster than the car business.” The company’s future may not lie in following the footsteps of Ford, then, so much as those of Duke Energy and Con Edison. Tesla, in other words, is transforming into a utility.Tesla’s core problem has been that its cars are falling behind the curve. Even with sagging sales, the company remains America’s biggest EV manufacturer, and its car sales still far outweigh the revenue it gets from energy storage. But Tesla’s models, once undeniably high-tech and cool, are aging.The Cybertruck debuted in November, but Tesla has sold only about 4,000 of them, less than the number of F-Series trucks that Ford sells on average in two days. Otherwise, Tesla hasn’t released an entirely new passenger model in more than four years. Its competitors have used the time to catch up. The Chinese brand BYD is pumping out dirt-cheap, stylish cars and recently surpassed Tesla as the world’s leading seller of EVs. BYD’s cars aren’t available in the U.S., but automakers such as Rivian, Hyundai, and Ford are selling high-tech electric cars. Americans now want affordable EV models, not just high-tech ones—and even Tesla’s push to incrementally cut sticker prices hasn’t achieved that. In yet another April debacle, Reuters reported that the company had scrapped a long-anticipated, more affordable model that would have sold for just $25,000. Musk did tell investors yesterday that the company is speeding up the timeline for more affordable vehicles built “on the same manufacturing lines as our current vehicle lineup.” But he did not specify prices and declined to answer a direct question about whether the cheaper cars will be entirely new models or tweaks to existing ones.[Read: America is missing out on the best electric cars]The company still has one big advantage in the EV game. No matter their manufacturer, nearly all future EVs in America will rely on Tesla. Just as gas stations were necessary to make the highway system usable, electric charging stations are a key hurdle to wider EV adoption. Tesla’s Superchargers are much faster and more reliable than those of many of their competitors, which is why most major auto manufacturers have declared that they will adopt Tesla’s proprietary charging port in future vehicles. The number of Supercharger stations across the country has increased steadily for years, and is expected to take off this decade.In a few years’ time, those Tesla Superchargers might all also draw power from Tesla’s batteries, which are the little-known core of the company’s transformation into a power provider. As America continues to pivot to clean energy, storage will become crucial: Solar and wind are and will continue to be the country’s fastest-growing renewables, but the energy grid can’t just turn off at night, on a cloudy day, or when the breeze dies down. Just as Tesla was ahead of the EV-adoption curve more than a decade ago, it is set up to be king of the battery boom.Since 2019, the company has been selling “Megapacks”—huge batteries that hold enough electricity to temporarily power thousands of homes—to grid operators in New York, Massachusetts, California, Dubai, Australia, the United Kingdom, and elsewhere, as well as to private customers, including Apple. Tesla is continuing to ramp up the factory in California that manufactures these batteries, as well as building another in Shanghai. Until recently, there hasn’t been much competition, and some analysts have predicted that the Megapack business could one day be worth “substantially more” than Tesla’s cars.[Read: Tesla’s magic has been reduced to its chargers]Tesla also sells Powerwalls, large batteries designed for home installation. Powerwalls have made up roughly half of all home-battery installations since 2018, and demand is set to explode. The company deployed more than twice as much energy storage in 2023 as in the year prior. Tesla also has a line of solar panels, and though that business has proved fickle, it is yet another way for the company to provide the raw power that an electrified world will require. With its chargers and batteries, Tesla’s main products are becoming infrastructural, a step removed from consumers but no less essential. Vaibhav Taneja, the company’s chief financial officer, said yesterday that energy-storage deployment should grow by at least another 75 percent this year and begin “contributing significantly to our overall profitability.”That future, of course, is far from preordained. Tesla’s auto business remains one of the few profitable EV operations in the country; Ford and GM are losing billions of dollars on EVs as they retool their companies away from the internal-combustion engine. And, to say the least, Musk is hardly a predictable executive. Yesterday’s earnings call suggested he is more infatuated with self-driving robotaxis than electrifying the grid: He’s doubled Tesla’s AI-training resources in three months. But self-driving cars are the opposite of a safe bet, and semiautonomous vehicles, which have become the industry standard, will no longer set Tesla apart. Clean energy is a highly competitive, capital-intensive, and rapidly changing industry. Just like its massive head start in the EV field, Tesla’s battery and charging advantages will not be self-sustaining.But absent a far more catastrophic collapse, Tesla appears to be successfully jumping from one wave of the clean-energy revolution to another—from providing cars to providing the electricity that will power not just cars, but also homes, offices, and more or less everything else. A decade from now, even as Tesla vehicles slide in popularity, the company’s influence may prove stronger than ever.
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