The Upside of Tesla’s Decline

Tesla, formerly the golden boy of electric vehicle manufacturers, has hit the skids. After nearly continuous sales growth for a decade, in May sales were down 15% year-on-year — the fourth consecutive month of decline. Profits were down fully 45% in the second quarter thanks to soft sales and price cuts. The only new model the company has produced in five years, the Cybertruck, has gotten weak reviews and been plagued with problems.

Electrifying transportation is a vital part of combating climate change, and for years Tesla benefited from the argument that as the pioneering American EV company, it was doing great work on the climate.

Declining sales aren’t good for Tesla CEO Elon Musk or the company’s shareholders. But the fact that other companies are taking up the slack — now accounting for a majority of EV sales — is good for the EV market as a whole. Here’s why.

First, from a traditional business standpoint, it is good to have several competitors in a market. This is how capitalism is supposed to work — for any particular good or service, a number of different businesses should be constantly fighting each other for profits by improving their products on price and quality (within the bounds of government regulations on safety, efficiency, and so on). When there is sustained competition, old, established companies have to keep researching and innovating, lest they lose market share to someone else.

We have seen this in the automobile space many times before, as when General Motors improved on Ford’s assembly line to come out with regular new models in the 1920s, or when upstart Japanese companies caught the incumbent American players flatfooted in the 1970s and 80s with small, reliable cars at a lower price. Modern cars are dramatically safer, cleaner, more reliable, and more efficient thanks in large part to this history of competition.

Second, Tesla’s peculiar history makes it a poor foundation for the EV industry. The company comes out of California’s Big Tech culture, with its ideology of “move fast and break things” and deep disdain for prior experience. The result, as auto journalist Edward Neidermeyer explains in his book Ludicrous: The Unvarnished Story of Tesla Motors, is an unusually shoddy and dangerous manufacturing culture. Tesla’s factories are notorious for poor working conditions and regular injuries, and its cars are infamous for inconsistent panel gaps, structural failures, and of course Autopilot accidents.

We can see these two factors at work in the growing number of superior options available from other EV companies. Tesla’s habit of putting as many controls as possible into a massive central screen seemed fancy at first, but drivers are starting to remember that physical buttons are both more reliable and easier to use while driving. In the economy segment, Hyundai’s Kona EV or Chevy’s Bolt EUV both have dead simple rocker switches for adjusting the temperature — no touchscreen menu fiddling required. Indeed, Tesla has even replaced such a bog standard control as the turn signal stalk with capacitive buttons in the most recent Model 3 and Model S, which is straight-up dangerous.

Even in the upmarket segments Tesla is falling behind. The new GM Silverado EV is far more of a real utility vehicle than the Cybertruck — in particular, it can actually tow serious distances. Unlike Tesla, Kia and Rivian now have three-row vehicles for big families with the EV9 and Rivian R1S. For enthusiasts, Tesla’s top-shelf Model S Plaid is very fast in a straight line, but Hyundai’s new Ioniq 5 N both handles far better and comes with a (faintly comical, yet fun) manual transmission simulation system. This is what happens when serious companies cater to as many market segments as possible.

Then there is the fact that Musk seems to have turned against Tesla’s Supercharger network, which is legitimately the best in the business. That fact, along with some government subsidies and requirements, is why every other EV company has settled on the Tesla charging plug as the North American standard. But Musk recently fired almost the entire Supercharger team apparently in a fit of pique, and though he hired some of them back, the system’s future is in doubt. Relying on Tesla to build out a proper national charging network is unwise.

Finally, there is Elon Musk himself. Last year, I argued that Tesla could evolve into a normal car company if it could just be run by somebody other than him — like, for instance, then-Chief Financial Officer Zach Kirkhorn, who seemed to be running things at the time. Unfortunately, Kirkhorn is out, and Musk has since taken back control. His pet project Cybertruck looks to be a flop, and he’s reportedly canceled the $25,000 model that was supposed to be the end goal of Tesla’s entire business plan (though Musk denies this). Instead he is pivoting back to robotaxis — which, if year after year of broken promises and misleading promotions are any judge — is not going to happen.

More importantly, Musk has harnessed his vast fortune—which is mostly Tesla stock—on behalf of Donald Trump. Musk promised to donate $45 million per month for the rest of the presidential campaign (though he later walked back that specific figure). A second Trump presidency will probably not end the EV transition—all the world’s big automakers have bet heavily on it—but it might dramatically slow it down in this country. Trump has promised to repeal the Inflation Reduction Act, which would end the $7,500 tax credit for EV purchases, not to mention the hundreds of billions in other subsidies for renewable power, utility-scale batteries, and much more. This would be a catastrophe for the climate and the American economy, which will lose out on the industries of the future to China and Europe.

Indeed, it could be that Musk sees his company can’t compete with the traditional manufacturers on quality or price, and so is hoping to strangle their EV divisions by cutting off their subsidies before they’ve reached profitability, so that Tesla remains the only big player in a much smaller market.

In doing so, he might hamstring all kinds of forthcoming EV innovations — from more energy-dense solid-state batteries, to hyper-efficient new models, to using one’s car as a virtual power plant, to who knows what else. (Although to be fair Chinese companies will surely figure these out sooner or later, even if Americans can’t buy them.)

Whatever the case, the fact that every new Tesla purchase or lease is now effectively an in-kind donation to the Trump campaign blows up any claim Musk has to be doing good on climate change, and makes buying one grossly irresponsible for the climate. The quicker this company loses its ludicrously overvalued stock price, the better.