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Only somebody like Elon Musk could have built Tesla. Now he could destroy it.
Tesla suffered yet another media black eye this week, when Reuters reported that the automaker had built deliberately false range estimates into its electric vehicles. According to the article, under the personal direction of CEO Elon Musk, the range estimation was rigged to exaggerate how far it could go, only triggering more realistic numbers when it got below 50 percent so the car could make it to a charging station. Then when that triggered mass repair requests from customers who thought their cars were broken, the company allegedly set up a “Diversion Team” to automatically close them out as quickly as possible.
This kind of thing is just par for the course for Tesla. Hyperbole, exaggeration, spin, and occasional outright dishonesty were how Musk built the company into a major force in the auto industry. But now his brand of careening irresponsibility is a threat to the company’s future.
Some good background on Tesla’s condition can be found in Ludicrous, an excellent book by automotive journalist Edward Neidermeyer, published back in 2019. He argues convincingly that Tesla’s initial success was precisely because Elon Musk is hilariously unsuited to the auto manufacturing industry. Building cars is an exceptionally challenging business, because of the huge capital requirements, strict safety regulations, and resulting low unit margins.
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Automakers also have to predict both what customers might like to buy several years in advance and predict how many sales they might make of each model, meaning heavy capital risk. And as the industry has evolved — particularly under competition from Japanese manufacturers — customers have come to expect extremely high quality and reliability even from cheaper mass-market vehicles, making success even more difficult.
In short, efficiency, standardization, and consistency are the name of the auto game. As Neidermeyer writes: “Successful automakers are giant, process-driven bureaucracies that rely on rigidly systematized cultures to manage a continent-spanning ballet of manufacturing operations, supply chains, service infrastructure, and regulatory compliance.”
Needless to say, Tesla was not anything like this. It came out of the freewheeling culture of Silicon Valley, with its motto of “move fast and break things,” its dogmatic ideology that every other institution in society but the tech industry is riddled with inefficiency and incompetence, and its belief that any problem can be solved by genius innovators hacking together solutions on the fly.
Musk viewed the stodgy, hyper-bureaucratic auto industry procedures with contempt, and assumed he could do better and cheaper with some good old Silicon Valley magic. He made wild-eyed promises, instructed his team to build factories that would move far faster than the deliberate pace at a traditional factory, and set impossible targets. As a result, Tesla consistently failed to meet its production goals, consistently struggled with factory operations, and suffered consistent quality problems. While Teslas are sleek and fancy-looking, customers have regularly complained of poor body panel alignment, leaks, rattles or other noises, bad service experiences, poor reliability, and other problems.
But Musk is — or was, at least — an hype man. He made grandiose promises about upcoming products and features — often shading into flagrant dishonesty, as shown in the range story above or the time when he oversaw a staged video of Tesla’s Autopilot feature. At the same time, he viciously attacked critics, often singling out journalists by name or even threatening to sue them, stifling much criticism. All this inspired a fervent cult of personality, heroic effort from key workers (though also high employee turnover), and a large cult-like community of investors who boost Tesla’s stock.
Musk also got lucky. He had the advantage that electric drive trains are dramatically simpler than internal-combustion ones, with far fewer parts and far less maintenance required, and also produce maximum torque at idle for breathtaking acceleration. He also got a large, low-interest loan from the federal government under the Obama administration, plus numerous other state and federal subsidies for producing zero-emission cars.
All this allowed Musk to keep raising money and selling stock to fund a consistently unprofitable business for years. His Silicon Valley-brained approach was terrible for actual factory production, but it helped him create a legend. And this really does seem to be the only way you could have built a mass market electric car startup. Realistic promises, careful engineering, and truthful marketing would have run headlong into the nearly impossible economics of the business. Nissan found this out when its Leaf project, in which it invested heavily, failed to live up to expectations, because it was a boringly useful appliance without any utopian dreams attached.
The problem for Tesla was that propaganda is not a sustainable business model. To keep the hype train going, Musk had to keep making more and more fantastical promises, and eventually his credibility started to erode. Meanwhile, the rest of the auto industry got into the EV game, including established fancy brands who took direct aim at Tesla’s aging luxury sedan and SUV models.
Neidermeyer thus predicted that Tesla would eventually stumble into bankruptcy, like every other major car startup since the 1920s. And this wasn’t an implausible idea at the time. Up through mid-2019, the company had posted a quarterly profit on just three occasions in its entire existence.
But a funny thing has happened since then. Starting in 2020, and accelerating through 2022, Tesla has posted consistent large profits, reaching a peak of $3.7 billion in the last quarter of 2022. There are two obvious explanations. The first is the subsidies in the Inflation Reduction Act. Tesla had previously run through its allotment of federal tax credits for its cars, but the law restored them for many of its models, boosting demand. The IRA also has a large subsidy for battery production, which granted the company between $150-250 million in the second quarter of this year.
The second explanation is that Musk is now spending most of his time running Twitter into the ground instead of fiddling with Tesla’s factories and models. As The Wall Street Journalreported back in May, Tesla’s Chief Financial Officer Zach Kirkhorn is now de facto running the company in Musk’s stead. By all accounts, Kirkhorn is exactly the kind of cool-headed, logical, spotlight-averse type of executive the company badly needs. Under his guidance over the last couple years Tesla seems to have focused on the boring nitty-gritty details of factory production, ironed out most of its production kinks, and is now delivering consistent numbers of vehicles. The company’s brand, meanwhile, remains strong enough that a critical mass of customers automatically turn to Tesla when considering an EV, despite it not releasing a new consumer model for the last three years.
Perhaps Musk’s Twitter purchase will be Tesla’s salvation. He’s already lost tens of billions of dollars on the deal, and his increasingly erratic antics on the platform have torched most of what remained of his reputation as a genius innovator. Most recently, he tweeted that he had reinstated the account of a QAnon conspiracy theorist who was banned for, in Musk’s words, “posting child exploitation pictures.” That’s an excuse for the Tesla board to give him the boot if ever there was one.
As a business, Tesla needed Musk’s megalomania and cult of personality to get off the ground. But now he is an existential threat. He remains CEO, and he’s gotten markedly more unhinged since spending hours and hours per day bantering online with antisemitic trolls. He could take back control at any time, demanding disruptive new changes to its factories or promising a new car that will, I dunno, fly into space. (The upcoming new Roadster — which Musk promised in 2017 to be delivered in 2020 and hasn’t been seen since — is supposed to have a package including “cold gas thrusters” from SpaceX.)
If Tesla wants to survive over the long term, it’s time for the adults to take charge.
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The Loan Programs Office is good for more than just nuclear funding.
That China has a whip hand over the rare earths mining and refining industry is one of the few things Washington can agree on.
That’s why Alex Jacquez, who worked on industrial policy for Joe Biden’s National Economic Council, found it “astounding”when he read in the Washington Post this week that the White House was trying to figure out on the fly what to do about China restricting exports of rare earth metals in response to President Trump’s massive tariffs on the country’s imports.
Rare earth metals have a wide variety of applications, including for magnets in medical technology, defense, and energy productssuch as wind turbines and electric motors.
Jacquez told me there has been “years of work, including by the first Trump administration, that has pointed to this exact case as the worst-case scenario that could happen in an escalation with China.” It stands to reason, then, that experienced policymakers in the Trump administration might have been mindful of forestalling this when developing their tariff plan. But apparently not.
“The lines of attack here are numerous,” Jacquez said. “The fact that the National Economic Council and others are apparently just thinking about this for the first time is pretty shocking.”
And that’s not the only thing the Trump administration is doing that could hamper American access to rare earths and critical minerals.
Though China still effectively controls the global pipeline for most critical minerals (a broader category that includes rare earths as well as more commonly known metals and minerals such as lithium and cobalt), the U.S. has been at work for at least the past five years developing its own domestic supply chain. Much of that work has fallen to the Department of Energy, whose Loan Programs Office has funded mining and processing facilities, and whose Office of Manufacturing and Energy Supply Chains hasfunded and overseen demonstration projects for rare earths and critical minerals mining and refining.
The LPO is in line for dramatic cuts, as Heatmap has reported. So, too, are other departments working on rare earths, including the Office of Manufacturing and Energy Supply Chains. In its zeal to slash the federal government, the Trump administration may have to start from scratch in its efforts to build up a rare earths supply chain.
The Department of Energy did not reply to a request for comment.
This vulnerability to China has been well known in Washington for years, including by the first Trump administration.
“Our dependence on one country, the People's Republic of China (China), for multiple critical minerals is particularly concerning,” then-President Trump said in a 2020 executive order declaring a “national emergency” to deal with “our Nation's undue reliance on critical minerals.” At around the same time, the Loan Programs Office issued guidance “stating a preference for projects related to critical mineral” for applicants for the office’s funding, noting that “80 percent of its rare earth elements directly from China.” Using the Defense Production Act, the Trump administration also issued a grant to the company operating America's sole rare earth mine, MP Materials, to help fund a processing facility at the site of its California mine.
The Biden administration’s work on rare earths and critical minerals was almost entirely consistent with its predecessor’s, just at a greater scale and more focused on energy. About a month after taking office, President Bidenissued an executive order calling for, among other things, a Defense Department report “identifying risks in the supply chain for critical minerals and other identified strategic materials, including rare earth elements.”
Then as part of the Inflation Reduction Act in 2022, the Biden administration increased funding for LPO, which supported a number of critical minerals projects. It also funneled more money into MP Materials — including a $35 million contract from the Department of Defense in 2022 for the California project. In 2024, it awarded the company a competitive tax credit worth $58.5 million to help finance construction of its neodymium-iron-boron magnet factory in Texas. That facilitybegan commercial operation earlier this year.
The finished magnets will be bought by General Motors for its electric vehicles. But even operating at full capacity, it won’t be able to do much to replace China’s production. The MP Metals facility is projected to produce 1,000 tons of the magnets per year.China produced 138,000 tons of NdFeB magnets in 2018.
The Trump administration is not averse to direct financial support for mining and minerals projects, but they seem to want to do it a different way. Secretary of the Interior Doug Burgum has proposed using a sovereign wealth fund to invest in critical mineral mines. There is one big problem with that plan, however: the U.S. doesn’t have one (for the moment, at least).
“LPO can invest in mining projects now,” Jacquez told me. “Cutting 60% of their staff and the experts who work on this is not going to give certainty to the business community if they’re looking to invest in a mine that needs some government backstop.”
And while the fate of the Inflation Reduction Act remains very much in doubt, the subsidies it provided for electric vehicles, solar, and wind, along with domestic content requirements have been a major source of demand for critical minerals mining and refining projects in the United States.
“It’s not something we’re going to solve overnight,” Jacquez said. “But in the midst of a maximalist trade with China, it is something we will have to deal with on an overnight basis, unless and until there’s some kind of de-escalation or agreement.”
A conversation with VDE Americas CEO Brian Grenko.
This week’s Q&A is about hail. Last week, we explained how and why hail storm damage in Texas may have helped galvanize opposition to renewable energy there. So I decided to reach out to Brian Grenko, CEO of renewables engineering advisory firm VDE Americas, to talk about how developers can make sure their projects are not only resistant to hail but also prevent that sort of pushback.
The following conversation has been lightly edited for clarity.
Hiya Brian. So why’d you get into the hail issue?
Obviously solar panels are made with glass that can allow the sunlight to come through. People have to remember that when you install a project, you’re financing it for 35 to 40 years. While the odds of you getting significant hail in California or Arizona are low, it happens a lot throughout the country. And if you think about some of these large projects, they may be in the middle of nowhere, but they are taking hundreds if not thousands of acres of land in some cases. So the chances of them encountering large hail over that lifespan is pretty significant.
We partnered with one of the country’s foremost experts on hail and developed a really interesting technology that can digest radar data and tell folks if they’re developing a project what the [likelihood] will be if there’s significant hail.
Solar panels can withstand one-inch hail – a golfball size – but once you get over two inches, that’s when hail starts breaking solar panels. So it’s important to understand, first and foremost, if you’re developing a project, you need to know the frequency of those events. Once you know that, you need to start thinking about how to design a system to mitigate that risk.
The government agencies that look over land use, how do they handle this particular issue? Are there regulations in place to deal with hail risk?
The regulatory aspects still to consider are about land use. There are authorities with jurisdiction at the federal, state, and local level. Usually, it starts with the local level and with a use permit – a conditional use permit. The developer goes in front of the township or the city or the county, whoever has jurisdiction of wherever the property is going to go. That’s where it gets political.
To answer your question about hail, I don’t know if any of the [authority having jurisdictions] really care about hail. There are folks out there that don’t like solar because it’s an eyesore. I respect that – I don’t agree with that, per se, but I understand and appreciate it. There’s folks with an agenda that just don’t want solar.
So okay, how can developers approach hail risk in a way that makes communities more comfortable?
The bad news is that solar panels use a lot of glass. They take up a lot of land. If you have hail dropping from the sky, that’s a risk.
The good news is that you can design a system to be resilient to that. Even in places like Texas, where you get large hail, preparing can mean the difference between a project that is destroyed and a project that isn’t. We did a case study about a project in the East Texas area called Fighting Jays that had catastrophic damage. We’re very familiar with the area, we work with a lot of clients, and we found three other projects within a five-mile radius that all had minimal damage. That simple decision [to be ready for when storms hit] can make the complete difference.
And more of the week’s big fights around renewable energy.
1. Long Island, New York – We saw the face of the resistance to the war on renewable energy in the Big Apple this week, as protestors rallied in support of offshore wind for a change.
2. Elsewhere on Long Island – The city of Glen Cove is on the verge of being the next New York City-area community with a battery storage ban, discussing this week whether to ban BESS for at least one year amid fire fears.
3. Garrett County, Maryland – Fight readers tell me they’d like to hear a piece of good news for once, so here’s this: A 300-megawatt solar project proposed by REV Solar in rural Maryland appears to be moving forward without a hitch.
4. Stark County, Ohio – The Ohio Public Siting Board rejected Samsung C&T’s Stark Solar project, citing “consistent opposition to the project from each of the local government entities and their impacted constituents.”
5. Ingham County, Michigan – GOP lawmakers in the Michigan State Capitol are advancing legislation to undo the state’s permitting primacy law, which allows developers to evade municipalities that deny projects on unreasonable grounds. It’s unlikely the legislation will become law.
6. Churchill County, Nevada – Commissioners have upheld the special use permit for the Redwood Materials battery storage project we told you about last week.