Tesla has had a tumultuous year so far.Hollis Johnson/Business Insider
- Tesla has a history of proving its doubters wrong, but this year, the automaker has faced a number of challenges.
- From CEO Elon Musk‘s erratic behavior to questions about its financial health and ability to build cars at scale, Tesla may be at an inflection point.
- Whether Tesla can overcome recent challenges could determine whether 2018 sets the stage for another improbable triumph or raises serious questions about the company’s future.
Tesla has a history of beating the odds.
CEO Elon Musk has said he believed the company had around a 10% chance of success when it was founded in 2003. Since then, the company has won awards for its vehicles, built an enthusiastic fanbase, and watched its market capitalization approach and at times top those of General Motors, Ford, and Fiat-Chrysler.
Part of the company’s success can be attributed to Musk’s rare gift for storytelling. Since taking over as the company’s chief executive in 2008, he’s outlined a vision for the company that extends beyond selling cars to transforming global energy grids. Investors have shown faith in Musk, which is why Tesla has been able to raise money without much difficulty despite posting consistent deficits.
But Tesla has faced a number of challenges this year, including concerns over its finances, ability to build cars at scale, and public comments attributed to Musk and Tesla. Now, the company is at an inflection point. Musk says the company will be consistently profitable starting in the third quarter and won’t have to raise money for the rest of the year. Some analysts and investors disagree with him.
Whether Musk lives up to his assertion could determine whether 2018 sets the stage for another improbable triumph or raises serious questions about Tesla’s future.
Here are the incidents that have led to Tesla’s latest moment of reckoning.
Have a Tesla news tip? Contact this reporter at [email protected].
Amazon account hacked to mine cryptocurrency
In February, Tesla‘s Amazon Web Services account was hacked to mine cryptocurrency. The hack, which was brought to Tesla’s attention by the cybersecurity startup RedLock, also reportedly exposed some of Tesla’s proprietary data related to mapping, telemetry, and vehicle servicing.
According to Fortune, Tesla paid RedLock over $3,000 as part of its bug bounty program, which rewards people who find vulnerabilities in the company’s products or services that could be exploited by hackers.
“The impact seems to be limited to internally-used engineering test cars only, and our initial investigation found no indication that customer privacy or vehicle safety or security was compromised in any way,” a Tesla spokesperson told Business Insider in an email.
A Model S recall
In March, Tesla issued the largest recall in its history. The recall involved power-steering systems in 123,000 Model S sedans. Tesla said five bolts responsible for holding the power-steering motor in place could corrode, break, or come loose, which could result in the loss of power steering.
But the company also said the problem was rare and most likely to happen in colder areas that use a specific kind of salt to lessen the amount of ice and snow on the road. According to Tesla, the problem was only relevant to Model S vehicles built before April 2016 and had affected just 0.02% of Model S vehicles at the time the recall was announced.
A fatal Model X crash
KTVU via Associated Press
In March, a Model X crashed into a highway barrier in Mountain View, California. The driver, Walter Huang, died after being taken to the hospital.
Autopilot, Tesla’s semi-autonomous system, was engaged during the accident, and Huang’s wife said he had complained about the system not working properly near the area where the crash occurred.
Tesla released a statement blaming Huang for the accident. The company said “the only way for this accident to have occurred is if Mr. Huang was not paying attention to the road, despite the car providing multiple warnings to do so.”
Huang’s family said they planned to sue Tesla.
While Tesla pointed to statistics that indicate fatal accidents are 3.7 times less likely to happen in Tesla vehicles that have Autopilot than in other vehicles, the crash highlights the difficulties automakers face as the industry slowly shifts toward autonomous vehicles.
A fight with the NTSB
Four days after the accident, the National Transportation Safety Board announced an investigation. Tesla helped the agency retrieve and interpret data from the vehicle’s logs, but the company clashed with the agency over Tesla’s decision to reveal information about the crash on its blog.
It can take 12-24 months for the NTSB to release a report about an investigation, and the agency doesn’t like outside parties to release information that hasn’t been approved by the agency.
As a result, Tesla is no longer a party to the agency’s investigation, though it will continue to assist the agency. Each side disagreed over who ended Tesla’s party status. The NTSB said it revoked it, while Tesla said it voluntarily chose to remove itself from the party agreement.
Debt concerns
In March, the rating agency Moody’s downgraded Tesla’s credit rating from B2 to B3 because of concerns about the company’s ability to hit its production targets for the Model 3. The move hurt Tesla’s stock price and drew attention to the frequency with which the company has spent and raised money. It also reignited concerns over whether the company might eventually go bankrupt.
Musk would later say that Tesla will be profitable by the end of the third quarter and won’t have to raise money this year.
Tesla misses Model 3 production target, later hits long-delayed goal
Hollis Johnson/Business Insider
Tesla made 9,766 Model 3 vehicles in the first quarter of this year, which marked a significant improvement over the fourth quarter of 2017. But the company didn’t hit its goal of producing 2,500 Model 3s per week by the end of the first quarter, reaching only 2,020 in its final week.
At the end of June, Tesla hit its goal of making 5,000 Model 3s in one week, a rate of production Musk originally hoped to achieve by the end of 2017. Tesla produced more vehicles during the second quarter of this year than in any previous quarter in the company’s history and made more Model 3 sedans than in the previous three quarters combined.
Musk fires back at reporter who hints at management shakeup
In early April, The Information released a report that claimed there was turmoil at the upper levels of Tesla’s management team. The report said Musk had pushed aside engineering vice-president Doug Fields to assume control of the Model 3 production process.
Musk criticized the story on Twitter in a response to its author, Amir Efrati.
“Can’t believe you’re even writing about this,” Musk wrote. “My job as CEO is to focus on what’s most critical, which is currently Model 3 production. Doug, who I regard as one of the world’s most talented engineering execs, is focused on vehicle engineering.”
The post set off a heated exchange between the two.
“How about we set up an interview and you can tell me, among other things, what you think is worth writing about,” Efrati replied.
“Uhh, hello, I need to build cars,” Musk said.
Musk admits Model 3 production mistakes
In April, Musk gave CBS This Morning host Gayle King a tour of the Fremont, California, factory where Tesla makes its cars. During an interview, Musk agreed when King mentioned the criticism that there are too many robots involved in the Model 3’s production.
He also agreed when King suggested that the factory could use more human workers and that automation had slowed the Model 3 production process and referred to a “crazy, complex network of conveyor belts” Tesla had used until it became clear it wasn’t working.
Musk later took responsibility for the amount of automation at the factory on Twitter.
“Yes, excessive automation at Tesla was a mistake. To be precise, my mistake. Humans are underrated,” he wrote in response to a Wall Street Journal reporter.
Workplace conditions called into question
In April, the Center for Investigative Reporting published an investigative report saying Tesla had misreported workplace injuries and failed to take some safety measures at its factory in Fremont, California.
Specifically, the report says Tesla failed to report injuries employees incurred while at work or mislabeled them, avoided some safety markings for aesthetic reasons, and insufficiently trained some employees for dangerous work. It added that the California occupational-safety agency had logged over 40 violations from Tesla since 2013.
In a blog post, Tesla denied the allegations in the report, calling it “a completely false picture of Tesla and what it is actually like to work here” and “an ideologically motivated attack by an extremist organization working directly with union supporters to create a calculated disinformation campaign against Tesla.”
Musk spars with Wall Street analysts
Musk rejected questions from two Wall Street analysts during the company’s unusual first-quarter earnings call on May 2.
“Excuse me. Next. Boring bonehead questions are not cool,” Musk said after Sanford C. Bernstein & Co. analyst Antonio Sacconaghi asked about Tesla’s future capital requirements.
The next question came from RBC Capital Markets analyst Joseph Spak, who asked about Model 3 reservations.
“These questions are so dry. They’re killing me,” Musk said, before turning to Galileo Russell, a retail investor who runs a YouTube channel about Tesla. Russell was allowed to ask several questions about a range of subjects, none of which concerned Tesla’s financial health.
Tesla’s stock dropped 8% in after-hours trading after the call.
Musk later explained why he rejected the questions on Twitter, but said he should have answered them.
“Once they were on the call, I should have answered their questions live. It was foolish of me to ignore them,” he wrote.
A fatal Model S crash
The driver of a Tesla Model S and one of his passengers died after the vehicle was involved in a single-car crash in Fort Lauderdale, Florida, on May 8.
The vehicle caught fire after it crashed into a concrete wall. The vehicle’s speed is believed to be a factor in the accident.
The driver, Barrett Riley, and front-seat passenger, Edgar Martinez, were both 18-years-old. The backseat passenger, 18-year-old Alexander Berry, was thrown out of the vehicle after the crash and taken to a nearby hospital. Berry survived the incident, according to the Sun Sentinel.
The National Transportation Safety Board (NTSB) announced on May 9 that it would investigate the crash. The agency said in a press release that the investigation would focus on the emergency response related to the battery fire that followed the crash, “including fire department activities and towing operations.” The agency said it does not expect Autopilot to be a part of the investigation.
Key executives leave
Tesla has experienced a high rate of executive turnover this year, though a company spokesperson said its attrition rate among employees at the “director” level or higher has fallen by double digits in the past 12 months.
High-profile departures have included executives working in finance, manufacturing, engineering, sales, human resources, and communications. In September, former vice president of communications Sarah O’Brien, former chief people officer Gabrielle Toledano, and former chief accounting officer Dave Morton have left Tesla. Vice president of worldwide finance and operations Justin McAnear will leave in October.
Two more Autopilot crashes
South Jordan Police Department via AP
On May 11, a Model S crashed into a fire department vehicle in Utah while Autopilot was engaged. The driver told police she had been looking at her phone at the time of the collision, which left her with a broken ankle.
According to a report Tesla provided to the South Jordan Police Department, the driver took her hands off the wheel over 12 times during the trip, including for the 80 seconds before the collision.
In May, a Model S crashed into a police vehicle in California while Autopilot was engaged. The police department vehicle was empty at the time of the collision, while the driver of the Model S sustained minor injuries, according to local authorities.
Autopilot marketing methods criticized
On May 23, Consumer Watchdog and the Center for Auto Safety sent a letter to the Federal Trade Commission asking the agency to investigate the strategies Tesla has used to sell Autopilot. The letter says the company has led customers to overestimate Autopilot’s safety and the amount of driving it can control.
“Two Americans are dead and one is injured as a result of Tesla deceiving and misleading consumers into believing that the Autopilot feature of its vehicles is safer and more capable than it actually is,” the letter reads.
The letter criticized the language Tesla uses on its website, videos the company has produced, press releases it has published, and comments made by Musk.
Tesla lays off around 9% of its employees
Tesla laid off around 9% of its employees in June. In an email to employees, Musk said the layoffs would primarily affect salaried employees, sparing production-line workers as the company ramped up Model 3 production. He said Tesla had developed redundancies in some job functions that were no longer necessary.
“Difficult, but necessary Tesla reorg underway,” Musk said in a tweet accompanying images of the email.
Some former employees told Business Insider they were surprised by the layoffs.
A Model S catches fire in the middle of the street
Mary McCormack Tesla Model S on fire@marycmccormack / Twitter
A Model S suddenly caught fire in June in Los Angeles. The fire drew attention after the actress Mary McCormack — whose husband, British director Michael Morris, was driving the vehicle — shared a video of it on Twitter. In the video, fire can be seen beneath the vehicle’s front left tire.
In a preliminary report on its investigation into the incident, the NTSB said the incident didn’t cause any injuries, but did not offer any reasons why the vehicle may have caught fire.
Fires at Fremont
An aerial view of the area where a fire erupted near the Tesla factory in Fremont, California, on Thursday, August 23.Screenshot via KTVU
A cardboard baler — which compresses cardboard to make it easier to store and recycle — caught fire outside Fremont factory in June. The Fremont Fire Department said on Twitter that the fire did not spread beyond the machine, but the machine and the tent it was housed in were damaged. There were no injuries, the department said. A Tesla spokesperson said the fire did not affect vehicle production.
In August, an unidentified building at Fremont caught fire. The Fremont Fire Department said the fire started in a “cardboard pile,” and Tesla said the fire affected a small patch of grass near a company parking lot.
Trouble ramping up solar roof production
Reuters reported in August that only 12 Tesla solar roofs — which consist of solar panels made to look like roof tiles — were connected to the grid in California as of May 31. Tesla began taking reservations for the solar roof in May 2017 and said installations would begin that summer, but the first installations for customers who weren’t Tesla employees didn’t begin until April 2018.
Reuters said Tesla has faced delays in its efforts to ramp up production of its solar roof tiles due to assembly-line issues at its Buffalo, New York, factory and the challenges involved in meeting Musk’s aesthetic expectations.
At the time, Tesla declined to comment on the number of solar roofs it has installed. A Tesla representative said the company was ramping up solar roof production and would increase the rate of production near the end of this year.
The SEC reportedly investigates Musk’s statements about taking Tesla private
Musk shocked observers when he said on August 7 that he was thinking about taking Tesla private and had secured the funding to do so. Musk’s statements attracted controversy and raised questions about the certainty of the funding he referenced and where exactly that funding would come from. Fox Business and The New York Times reported that the SEC had sent subpoenas to Tesla concerning Tesla’s plans to explore going private and Musk’s statements about the process.
The Wall Street Journal reported that the agency had been investigating how the company communicated production issues it faced with its Model 3 sedan before Musk’s tweets about going private.
On August 24, Musk said Tesla would remain a public company.
Azealia Banks says Musk was “scrounging for investors” to take Tesla private
Azealia Banks told Business Insider that Musk seemed concerned about getting financing for a potential go-private deal while she was at one of his homes in Los Angeles the weekend after he tweeted he had secured the funding to take Tesla private.
“I saw him in the kitchen tucking his tail in between his legs scrounging for investors to cover his ass after that tweet,” she said. “He was stressed and red in the face.”
Tesla declined a request for comment on Banks’ claims regarding Musk’s efforts to find investors and a representative for Musk said he had never met or communicated with Banks, but did not deny that Banks had stayed at one of his homes during the time period Banks specified.
Later, Musk told The New York Times that he briefly saw Banks during her weekend at his home.
“I saw her on Friday morning, for two seconds at about a 30-foot distance as she was leaving the house,” Musk said. “I’d just finished working out. She was not within hearing range. I didn’t even realize who it was. That’s literally the only time I’ve ever laid eyes on her.”
Tesla hit with lawsuits from shareholders
Max Whittaker / Getty Images
Tesla has been hit with multiple lawsuits from shareholders accusing Musk of misleading investors and manipulating the company’s stock price with his statements about taking the company private.
Tesla board members reportedly say they’re worried about Musk’s Ambien use
Aaron Bernstein / Reuters
Musk told The New York Times in a story published in August that he had used Ambien at times to help him sleep.
“It is often a choice of no sleep or Ambien,” Musk said.
The Times reported that some members of Tesla’s board of directors were concerned about Musk’s use of Ambien. The board members reportedly said that on some occasions the drug has helped lead Musk to use Twitter late at night instead of putting him to sleep.
Some suppliers are reportedly worried about Tesla gong bankrupt
The Wall Street Journal reported in August that eight of 22 auto industry suppliers surveyed by the Original Equipment Suppliers Association said they were concerned about the possibility of Tesla filing for bankruptcy. According to The Journal, 18 of 22 respondents said they considered Tesla a financial risk to their companies.
“We are definitely not going bankrupt,” Musk told The Journal.
Model 3 quality issues
Business Insider reported in August that a much higher percentage of Model 3s produced at the end of June required rework than a car at another auto plant might have.
According to internal documents reviewed by Business Insider, around 14% of the Model 3s produced during the final week of June didn’t require rework. Ron Harbour, a consultant at Oliver Wyman who writes a report on manufacturing, said about 65%-80% of the vehicles produced at the average auto plant don’t require rework.
A Tesla spokesperson told Business Insider that rework can include small issues and that most of its cars do not have significant problems when they get to the end of the production line.
Musk smokes weed during live interview after saying its bad for productivity
Joe Rogan Experience/YouTube
In a September interview with Joe Rogan, Musk was filmed smoking marijuana. (Recreational use of Marijuana is legal in California, where the interview was filmed.)
Before his interview with Rogan, Musk told The New York Times in August that marijuana hurts one’s ability to work.
“Weed is not helpful for productivity. There’s a reason for the word ‘stoned.’ You just sit there like a stone on weed,” Musk said.
California regulators investigate Tesla’s workplace conditions
California’s Division of Occupational Safety and Health (Cal-OSHA) has seven open inspections into Tesla. The agency has opened three new inspections into the Fremont factory in September.
The first was opened on September 4 and was prompted by an incident reported to the agency in which a contract worker became stuck between two garbage bins after a forklift pushed one of the bins. The second was opened on September 5 and came after an incident reported to the agency in which a contract worker’s fingers were caught in a torque gun. And the third was opened Tuesday following a report made to the agency September 14 of an accident, which occurred on September 14, in which a Tesla employee had part of a finger amputated while moving a rack of windshields onto a conveyor.
Inspections do not necessarily lead to financial penalties or findings of wrongdoing.
“Tesla takes safety extremely seriously and is constantly identifying safety improvements across our global operations to help us become one of the safest places to work,” a Tesla spokesperson said.
Musk says Tesla is in ‘delivery hell’
Musk said last Sunday that Tesla’s most pressing issues had moved from producing vehicles to delivering them, though he said delivery issues were easier to fix and would be solved soon.
Musk had previously said that some Tesla customers would have to wait longer to get a response from customer service due to a significant increase in vehicle deliveries.
Musk sued by the British diver he called a “pedo”
In July, Musk called British diver Vernon Unsworth, who was involved in the Thai cave rescue, a pedophile in a tweet and said he would bet money to back his accusation after Unsworth said the miniature submarine Musk designed and sent to Thailand to help with the rescue would have been ineffective and was merely a publicity stunt. Musk later apologized to Unsworth and deleted the tweet.
But Musk suggested in August that it was unusual Unsworth hadn’t sued him yet and asked a Twitter user who brought up the matter why he hadn’t investigated it. Unsworth filed a defamation lawsuit against Musk on September 17 in which he alleges that his reputation was damaged as a result of “false and defamatory” tweets and emails written by Musk that said Unsworth is a pedophile who married a 12-year-old girl in Thailand without presenting reliable evidence to back those claims. The lawsuit denies that Unsworth is a pedophile or has a child bride and seeks damages of over $75,000.
“Elon Musk falsely accused Vern Unsworth of being guilty of heinous crimes,” Unsworth’s lawyer, L. Lin Wood, said in a statement to Business Insider. “Musk’s influence and wealth cannot convert his lies into truth or protect him from accountability for his wrongdoing in a court of law.”
Representatives for Musk did not respond to requests for comment.
