If Elon Musk can’t make Tesla profitable, there’s little hope that electric cars will take over any time …

Tesla is a car company, not a technology company, and it should be valued as such. That is the big message from Elon Musk’s sorrowful statement …

Tesla is a car company, not a technology company, and it should be valued as such. That is the big message from Elon Musk’s sorrowful statement about job losses on Friday. Tesla has revolutionised the motor industry, but will end up either as a niche producer of high-end cars, or will be taken over by one of the established automotive giants.

The key point he acknowledged is that it is very hard to produce the base model of the Tesla 3, supposedly priced at $35,000 (£27,000), and make a profit. Up to now people have argued that as production was ramped up, rising volumes would reduce unit costs. This year Tesla has indeed managed to do so, but costs have not fallen. We don’t have costing details, but it may even be that the inefficiencies brought about by the huge pressure to get the cars out of the factory have actually increased unit costs. You can pump up output by piling on more labour, but that means you don’t get the economies of scale.

There is a further issue with the Tesla 3. It has not been designed for easy manufacture. Rival companies, as they always do, have pulled the car to bits to see how it is made, and the general conclusion is that while it is very clever electronically, it is not that easy to build. Musk has in effect acknowledged this, by noting the narrow margins. There will be design changes that will simplify production, but as the government incentive payments to buy electric cars are progressively eliminated, Tesla will have to run hard to stay in the same place.

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But if Tesla cannot make a profit on Model 3, then its future as an independent manufacturer is not secure. Its share price fell by more than 10 per cent on Friday, but its market capitalisation – that is, its current value on the stock market – is still more than $50bn. Ford’s market cap, by contrast, is $32bn. And Tesla is strapped for cash. It has to make a bond repayment in March of $920m and while it still has a cash pile of around $2bn, this is shrinking as much of it is needed for more investment.

So what will happen?

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1/8 Mahabis bust

High-end slipper retailer Mahabis has gone into administration. 2 Jan 2019
Mahabis

2/8 Costa Cola

Coca-Cola has paid £3.9bn for Costa Coffee. A cafe chain is a new venture for the global soft drinks giant
PA

3/8 RIP Payday Loans

A funeral procession for payday loans was held in London on September 2. The future of pay day lenders is in doubt after Wonga, Britain’s biggest, went into administration on August 30
PA

4/8 Musk irks investors and directors

Elon Musk has concluded that Tesla will remain public. Investors and company directors were angry at Musk for tweeting unexpectedly that he was considering taking Tesla private and share prices had taken a tumble in the following weeks
Getty

5/8 Jaguar warning

Iconic British car maker Jaguar Land Rover warned on July 5, 2018 that a “bad” Brexit deal could jeopardise planned investment of more than $100 billion, upping corporate pressure as the government heads into crucial talks
AFP/Getty

6/8 Spotif-IPO

Spotify traded publically for the first time on the New York Stock Exchange on Tuesday. However, the company isn’t issuing shares, but rather, shares held by Spotify’s private investors will be sold
AFP/Getty

7/8 French blue passports

The deadline to award a contract to make blue British passports after Brexit has been extended by two weeks following a request by bidder De La Rue. The move comes after anger at the announcement British passports would be produced by Franco-Dutch firm Gemalto when De La Rue’s contract ends in July.The British firm said Gemalto was chosen only because it undercut the competition, but the UK company also admitted that it was not the cheapest choice in the tendering process.

8/8 Beast from the east economic impact

The Beast from the East wiped £4m off of Flybe’s revenues due to flight cancellations, airport closures and delays, according to the budget airline’s estimates. Flybe said it cancelled 994 flights in the three months to 31 March, compared to 372 in the same period last year.

1/8 Mahabis bust

High-end slipper retailer Mahabis has gone into administration. 2 Jan 2019
Mahabis

2/8 Costa Cola

Coca-Cola has paid £3.9bn for Costa Coffee. A cafe chain is a new venture for the global soft drinks giant
PA

3/8 RIP Payday Loans

A funeral procession for payday loans was held in London on September 2. The future of pay day lenders is in doubt after Wonga, Britain’s biggest, went into administration on August 30
PA

4/8 Musk irks investors and directors

Elon Musk has concluded that Tesla will remain public. Investors and company directors were angry at Musk for tweeting unexpectedly that he was considering taking Tesla private and share prices had taken a tumble in the following weeks
Getty

5/8 Jaguar warning

Iconic British car maker Jaguar Land Rover warned on July 5, 2018 that a “bad” Brexit deal could jeopardise planned investment of more than $100 billion, upping corporate pressure as the government heads into crucial talks
AFP/Getty

6/8 Spotif-IPO

Spotify traded publically for the first time on the New York Stock Exchange on Tuesday. However, the company isn’t issuing shares, but rather, shares held by Spotify’s private investors will be sold
AFP/Getty

7/8 French blue passports

The deadline to award a contract to make blue British passports after Brexit has been extended by two weeks following a request by bidder De La Rue. The move comes after anger at the announcement British passports would be produced by Franco-Dutch firm Gemalto when De La Rue’s contract ends in July.The British firm said Gemalto was chosen only because it undercut the competition, but the UK company also admitted that it was not the cheapest choice in the tendering process.

8/8 Beast from the east economic impact

The Beast from the East wiped £4m off of Flybe’s revenues due to flight cancellations, airport closures and delays, according to the budget airline’s estimates. Flybe said it cancelled 994 flights in the three months to 31 March, compared to 372 in the same period last year.

I was struck by the difference in the tone of Musk’s message. There was none of the usual bombast we’ve come to expect from him. He wrote: “We, unfortunately, have no choice but to reduce full-time employee headcount by approximately 7 per cent (we grew by 30 per cent last year, which is more than we can support) and retain only the most critical temps and contractors … Tesla will need to make these cuts while increasing the Model 3 production rate and making many manufacturing engineering improvements in the coming months. Higher volume and manufacturing design improvements are crucial for Tesla to achieve the economies of scale required to manufacture the standard range (220 mile), standard interior Model 3 at $35,000 and still be a viable company. There isn’t any other way.”

Still be a viable company?

Once a chief executive starts warning that a company might not be viable, you know something big has changed. It is certainly not a company worth $50bn. The switch to electric cars will continue, but the quest for an affordable vehicle (in that $35,000 counts as affordable) is a long and difficult one

I think the verdict on Elon Musk will be that he created an extraordinary company that created a line of extraordinary products, the Model S being the key game changer. By doing so he changed the automotive industry forever. The switch to electric cars will happen much more swiftly than it otherwise would. But he has not learnt how to make money out of the business, and with present technology and costs he can’t. He is also better at creating a business than running it. But whatever happens to Tesla, the revolution continues.



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Grimes and Azealia Banks have been subpoenaed for evidence on Elon Musk

It’s happened. Grimes and Azealia Banks have officially been dragged into Elon Musk‘s ongoing fraud case brought by allegedly-misled Tesla …

It’s happened. Grimes and Azealia Banks have officially been dragged into Elon Musk’s ongoing fraud case brought by allegedly-misled Tesla investors. The subpoenas, granted by the US district court of northern California, won’t instruct the musicians to provide evidence in court, as reported by Business Insider. But they will have to preserve certain documents, such as Insta messages and tweets, along with other evidence deemed “highly subject to deletion”.

Other subpoenas instructing the preservation of evidence will be served against Business Insider itself, along with The New York Times and Gizmodo.

If you’ve not been keeping up with the absolute fiasco that is Elon Musk’s fraud case – and you might be wondering why Grimes and Azealia Banks have to do with it – we’ll give you the rundown. Basically, when Elon tweeted that he was considering taking Tesla private at $420 a share (apparently he’s into weed jokes) in August 2018, causing a spike of 11% in company shares, he failed to mention that he’d not actually secured funding. That’s what led him to be accused of misleading investors.

As for Azealia Banks, she was in Musk’s house around the same time, waiting to record a song with his girlfriend (Grimes, for the uninitiated), and in a series of tweets, she gave a little insight into what was going on.

This involved calling Musk and Grimes “crackheads” and alleging that Musk was tweeting on acid, so it’s pretty easy to imagine why she’d be of interest in the lawsuit. In fact, the complaint says Banks has “proven a key source of information” for the case, The Guardian reports.

Do drawn-out lawsuits about misleading investors get much more exciting? It’s very unlikely.

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The risk of thinking of your job as a higher calling

In a memo announcing that Tesla will lay off 3,000 workers, or 7% of its employees, CEO Elon Musk outlined his reasoning, explaining the mounting …

In a memo announcing that Tesla will lay off 3,000 workers, or 7% of its employees, CEO Elon Musk outlined his reasoning, explaining the mounting financial pressures the company faces in its quest to build an affordable electric car.

The memo also included a noteworthy emotional appeal. Musk essentially asked employees— those who have already survived a brutal work schedule and will stay on to survive more of the same—to remember Tesla’s mission. Segueing from details about the company’s financial picture to the news of the layoffs, Musk writes:

There are many companies that can offer a better work-life balance, because they are larger and more mature or in industries that are not so voraciously competitive. Attempting to build affordable clean energy products at scale necessarily requires extreme effort and relentless creativity, but succeeding in our mission is essential to ensure that the future is good, so we must do everything we can to advance the cause.

Musk often references his ambitious plans to save humanity, whether via Tesla or his space-faring SpaceX. Still, as CEO messaging goes, this attempt to rally the remaining troops and push them to their limits work-wise is suspect. And management research shows it could easily backfire.

A career “calling” and the risk of exploitation

Dawna Ballard, a scholar of chronemics—the study of time and our relationship to it—says she wasn’t surprised to learn that Musk was pointing to “the cause” as an implied explanation for the impossibility of creating a strong work-life balance.

A professor in the communication studies department at the University of Texas at Austin, Ballard already uses articles about Musk’s famously intense work habits in classes, because, as she explains, he repeatedly disparages the idea that excellent, competitive work and a humane schedule can co-exist. Everything is “subjugated to work’s demands,” Ballard says, making Musk the archetype subscriber to a cultural norm she wants her students to dissect. His appeal to “the cause” fits well within his ethos, she adds, but it also reads to her like a mash-up of a known phenomenon in social-sector jobs and private-sector expectations.

People who work in social-sector jobs that serve a moral purpose, such as protecting children from abuse or serving the elderly, are typically under-resourced and overworked, mainly, Ballard says, because of the myth that people who heed a higher calling—including teaching or nursing—can somehow be satisfied with the knowledge that they’re improving the world. This idealized view that connects our noblest work to poverty “comes from the priesthood,” she says, “and can be used as a way to get people to downplay practical needs and concerns,” like sleeping and eating.

But, no matter what we want to believe, “there are just physiological barriers,” says Ballard. “There’s only so many hours in a day, and there are only so many hours a person can work and still function.”

In her recent research, she found that social workers who were forced to work overtime made mistakes in their reporting and were more prone to transgressions like faking check-in visits to the homes of at-risk children.

Convincing governments to improve budgets for such employees is a challenge, not only because of our cultural assumptions around “calling” professions, but because spending the money to give social workers the time and tools they need to work properly may not show immediate payoffs. The combination creates the conditions for exploitation, Ballard argues.

That focus on immediate benefits is even more intense at a publicly traded company, she points out, which is why she sees hazards ahead for Musk and Tesla employees. Making the future “good”—to use Musk’s term—is not a quarterly project, as a slim minority of private-sector companies have come to appreciate.

If Ballard’s comparison is apt, Tesla’s overworked employees may also be more likely to make mistakes or worse, because advancing a cause can’t protect people from the dangers that come from not respecting the body’s need for time to recuperate. Choosing to sacrifice work-life balance, instead of revenue, is bad math.

Meaningfulness can’t be enforced

Musk is not alone in emphasizing mission and meaningfulness. His rhetoric in today’s note can also be read as part of a fashionable management trend: the interest in harnessing the human need to feel fulfilled on a spiritual level to better motivate employees.

If that sounds like a dark ploy, that’s because it often is. In a 2017 paper titled “The mismanaged soul: Existential labor and the erosion of meaningful work,” a team of UK organizational behavior scholars picked apart the research on this tactic, and found “the active management of meaningful work can be used cynically as a means of enhancing motivation, performance and commitment” and that some companies have used ”the rhetoric of service to a higher ideal to mislead members about the nature of their work, what the organization can offer employees, and about the societal value of the organization, in pursuit of the profit motive.”

The authors, led by management professor Catherine Bailey (then of the University of Sussex, now of King’s College London), also note that meaning doesn’t have to come from saving the world. Inviting employees to align themselves with the greater cause of an entire organization, as Musk has done, is one option, but employees also have been successfully nudged to find meaning in their individual tasks, their particular role, and in the sense of belonging to something like a family at work.

Good things can come from companies tapping into the common need for a higher calling—productivity levels go up and people feel better about themselves, the paper concludes. So leveraging this form of employee loyalty or pride—through rhetoric, for example—is not dodgy in and of itself, when the work holds authentic meaning, but it becomes fraught when the cause is manufactured or misleading.

When that happens, and research has also found that employees easily detect such cases, employee trust and engagement is eroded and the staff becomes less committed. Some individuals may perform a type of “emotional labor,” performing the act of buying into the company’s narrative, which is exhausting. Yet another possibility is that rather than leave a job, an employee will unconsciously recalibrate behaviors and feelings to better align with the company’s definition of meaning, even when it counters their own.

For instance, believing that it’s okay for a fabulously wealthy CEO to lay off thousands of people and put extra time pressures on those left behind—because that’s the way capitalism works, or because the still-expanding company has had a rocky year, or because the health of the planet is at stake—could be a short-term form of self-preservation, one that might ultimately lead to long-term burnout.

But while Tesla’s mission is indisputably connected to a noble goal to protect the environment and maybe even save humanity, there’s also a case to be made for answering that calling without burdening employees any more than you already have.

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Grimes and Azealia Banks subpoenaed in Elon Musk lawsuit

Grimes and Azealia Banks subpoenaed in Elon Musk lawsuit … against Tesla founder Elon Musk brought by a group of the company’s shareholders.

The US district court of northern California has granted a motion to subpoena the musicians Grimes (AKA Claire Boucher) and Azealia Banks in the ongoing lawsuit against Tesla founder Elon Musk brought by a group of the company’s shareholders.

Additional subpoenas will be served against the publications Business Insider, the New York Times and tech website Gizmodo. The subpoenas will instruct the parties to preserve certain documents, including Twitter and Instagram messages and other potential evidence relating to the lawsuit, which the filing argues are “highly subject to deletion”.

The parties have not been called upon to provide evidence in court, according to a report in Business Insider. Grimes, Banks and Musk have not commented on the news. The Guardian has contacted representatives for each party.

Tesla’s investors are suing the company and Musk in a class-action lawsuit. They claim that Musk made false and misleading statements when he tweeted, in August 2018, that he was considering taking the company private at $420 (£324) a share. The plaintiffs allege that the tweet affected shareholders as they falsely believed he had secured funding to take the company private. The tweet provoked an 11% surge in shares in the company.

Elon Musk in Beijing this month to meet Chinese premier Li Keqiang.

Elon Musk in Beijing this month to meet Chinese premier Li Keqiang. Photograph: Mark Schiefelbein/AP

Musk attempted to justify the tweet, writing in a blogpost that the Saudi investment fund that owns 5% of Tesla had approached him several times over the last two years with offers of help. If investigators conclude Musk overstated the nature of the financing, it could form the basis for bringing a market manipulation case.

Last September, the US Securities and Exchange Commission charged Musk, 47, with misleading investors. The tweets had no basis in fact, and the ensuing market chaos hurt investors, regulators claimed. Tesla and Musk agreed to pay $20m each to the SEC and, under a settlement, the billionaire stepped down as the company’s chairman but remained as chief executive.

Grimes was in a relationship with Musk when he sent the tweet and had recently accompanied him on a trip to China. Banks claims she was staying at one of Musk’s Los Angeles properties at the time he posted the tweet, allegedly waiting for Grimes to participate in a planned collaboration.

Banks claimed that she saw Musk “scrounging for investors”. She also alleged that he was tweeting while on acid. Musk claimed he had never met Banks. The complaint says Banks “has proven to be a key source of information” in this matter.

‘Key source of information’ … Azealia Banks.

‘Key source of information’ … Azealia Banks. Photograph: Jonny Weeks for the Guardian

“Ms Boucher and Ms Banks were in close contact with Mr Musk before and after the tweet and are believed to be in possession of relevant evidence concerning Mr Musk’s motives,” Adam M Apton, the lawyer representing the investors, told Business Insider earlier this month.

In late August, Banks apologised to Musk “for all of the painful events you’ve endured over the past week, as I feel as though my actions have largely exacerbated them”. However, in early January, Banks appeared to threaten Musk after the tech billionaire’s lawyers maligned the rapper’s credibility in a filing.

“They are still slighting me like I don’t have plenty more dirt to spill on Elon,” Banks wrote in an Instagram post that she later deleted. “This is going to get extremely ugly … Elon will learn very soon who is more powerful of us two.”

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Elon Musk announces Tesla will cut around 3000 jobs after the carmaker failed to hit production …

‘The road ahead is very difficult,’ the company’s founder and CEO Elon Musk said in an email to employees. He said Tesla hopes to post a ‘tiny profit’ …

Elon Musk announces Tesla will cut around 3,000 jobs after the carmaker failed to hit production goals – despite hiring 10,000 more workers in the last year alone

  • Musk said Tesla will post a ‘tiny profit’ this quarter but would need cutbacks
  • The company failed to meet its target of producing 500,000 cars in 2018
  • Tesla’s shares tumbled this month after it cut vehicle prices by 2,000 dollars

ByGeorge Martin For Mailonline

Published: 06:10 EST, 18 January 2019 | Updated: 09:35 EST, 18 January 2019

Tesla is to cut its workforce by about 7% after a difficult year for the electric car maker.

‘The road ahead is very difficult,’ the company’s founder and CEO Elon Musk said in an email to employees.

He said Tesla hopes to post a ‘tiny profit’ in the current quarter but that after expanding its workforce by 30% last year, it cannot support that size of staff.

Tesla CEO Elon Musk has warned of a difficult road ahead and expects to cut around 7 per cent of the company's workforce

Tesla CEO Elon Musk has warned of a difficult road ahead and expects to cut around 7 per cent of the company's workforce

Tesla CEO Elon Musk has warned of a difficult road ahead and expects to cut around 7 per cent of the company

Mr Musk said in October that Tesla had 45,000 employees. A 7% cut would involve laying off about 3,150 people.

Tesla’s shares tumbled earlier this month after it cut vehicle prices by 2,000 dollars and announced fourth-quarter sales figures that fell short of Wall Street estimates.

‘Our products are too expensive for most people,’ Mr Musk said in the memo to Tesla staff saying the company has to ‘work harder’.

‘Tesla has only been producing cars for about a decade and we’re up against massive, entrenched competitors,’ he said.

The company says it delivered over 245,000 electric cars and SUVs last year, nearly as many as all previous years combined.

But its 2018 production fell far short of a goal set nearly three years ago of manufacturing 500,000 vehicles for the year.

According to Tesla, the company failed to hit production goals set three years ago of making 500,000 vehicles in 2018

According to Tesla, the company failed to hit production goals set three years ago of making 500,000 vehicles in 2018

According to Tesla, the company failed to hit production goals set three years ago of making 500,000 vehicles in 2018

That goal was announced in May of 2016 based on advance orders for its mid-range Model 3, which sells for 44,000 dollars.

Mr Musk said Tesla plans to ramp up production of the Model 3, ‘as we need to reach more customers who can afford our vehicles’.

‘Attempting to build affordable clean energy products at scale necessarily requires extreme effort and relentless creativity,’ he said in the memo.

‘But succeeding in our mission is essential to ensure that the future is good, so we must do everything we can to advance the cause.’

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