Musk's extremely hardcore pivot: 'It's astonishing what's happened to Tesla'

The origin of Tesla was rooted in two goals: electrify transportation to drive down emissions that are warming the planet; and do it by driving down the cost of electric vehicles to make them accessible to the masses.

Is Musk now walking away from both?

“He's decided, 'I'm not a car company. I’m an AI and robotics company,'" said Steve LeVine, editor of The Electric, a publication on batteries and EVs from The Information. "It's astonishing what's happening with Tesla."

Tesla has always been a tumultuous company. But the last few months have been particularly chaotic — and possibly more transformative than any other moment in its history.

This week, we talk with LeVine about the whirlwind inside Tesla. We'll hear about a series of decisions by Musk that threw the car teams into turmoil, and could radically change the course of the company.

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Transcript

Stephen Lacey: Steve LeVine has been a foreign correspondent for the New York Times and Wall Street Journal. He's written multiple books on oil geopolitics and the global race to dominate batteries. And today, Steve edits The Electric, a publication from The Information. He's definitely one of the writers I closely follow for insider reporting on the battery industry.

Steve LeVine: I cover everything from the mines, battery, metals, mines, all the way through the value chain components, batteries all the way through to EVs and big geopolitics.

Stephen Lacey: And one topic that is unsurprisingly dominating his coverage of late, Tesla. He's had some big scoops from inside the company. Tesla has always been a tumultuous company to cover, but the last few months have been particularly chaotic, and possibly more transformative than any other moment in the company's history.

Steve LeVine: It's astonishing what's happening with Tesla. I'm not sure that people are really understanding what's happened.

Stephen Lacey: The origin of Tesla was rooted in a couple of things. Drive down the cost of EVs to eventually make an affordable family car and do it to electrify transportation as quickly as possible to drive down emissions that are warming the planet.

Elon Musk: It's really important that people demonstrate to governments around the world that they care about climate change.

Steve LeVine: Elon started out in the 2000s, 2003, 2005, 2006 with his very idealistic idea, his ethos, "I'm going to electrify all of the cars on the earth and through that, I'm going to help resolve climate change."

Elon Musk: Basically, everyone who doesn't have a vested interest or isn't crazy thinks this is a real serious issue.

Stephen Lacey: Even with all the crazy growth and ups and downs and stops and starts, those two goals have always been a part of Tesla's ethos. But this February, Musk made a series of abrupt decisions that possibly changes both.

Steve LeVine: Over the last few months, that has all been put on its head.

Speaker 4: Founder and CEO Elon Musk posted a vague message on social media yesterday. The post on X simply read, "Tesla robotaxi unveil on 8/8." Musk has spoken about a robot taxi project for years, but some analysts say it is a risky bet.

Steve LeVine: He's decided, "I'm not a car company. I'm an AI and robotics company and I'm about creating a $10 trillion company that is based on first robotaxi, but then these humanoid robots," and he canceled the family car, the affordable car, the one that was going to sell in the millions every year and really take Tesla cars from being more or less niche for first movers, tech first movers into the mainstream. He canceled that. Well, that's not idealistic. That's not about climate change.

Stephen Lacey: Musk has always been an erratic and demanding leader. The people working for him put up with it because they believe in the mission, but now, he appears to be downplaying or possibly canceling plans to build an affordable EV model. That model's called the Model 2. Musk also laid off the entire supercharger team, and now, he's putting all his attention on an autonomous robotaxi. As Steve has reported, this left team's inside Tesla scrambling and questioning the future of the company.

Steve LeVine: The folks who are actually producing the car itself, making the batteries, making the powertrain, making the vehicle, they're unhappy.

Stephen Lacey: Would you call it a crisis, a turning point? How would you characterize the last few months of moves and what version of Tesla are they ultimately going to make?

Steve LeVine: I think it is a crisis. If you don't have the Model 2 and you don't have new affordable vehicles to bring out by the first quarter of next year like you promised and you can't do the robotaxi on time, what do you have? What are you going to say next year? What is Tesla going to sell? All of those things together add up to me to a crisis moment. So Tesla has changed. Elon Musk has changed, and the world will catch up to this and then we'll see what happens.

Stephen Lacey: This is The Carbon Copy. I'm Stephen Lacey. This week, a conversation with Steve LeVine from The Information on what's happening inside Tesla. We'll hear about his reporting on a series of decisions by Musk that is throwing car teams into turmoil and radically changing the course of the company. If there's any starting point for the current Tesla turmoil, it might be February 28th when Elon posted, "Tonight, we radically increased the design goals for the new Tesla Roadster," and he said the car would hit zero to 60 in less than a second. When he said "we", he really meant "I", didn't he? What happened?

Steve LeVine: He decided, so that week, it's the week of February 26th. He, ever since he bought Twitter, has kind of stepped away from his other companies including Tesla. But every now and then, he would step back into Tesla, into his other companies, and this was one of those weeks. Among the meetings that he had that week was with his Roadster crew, his Roadster team, and he decided himself without telling anyone else that it's going to go twice as fast as I said before. So instead of going from zero to 60 in 1.9 seconds, which is very fast, think in your mind, how long? Okay, that was about two seconds like that pause that I just did, right? That's going from zero to 60. He decided we're going to get there twice as fast. And so he tweets that, he said, "Tonight, we decided," so he sent this late at night, but his crew, the people actually working who would carry this out learned of this on Twitter.

Stephen Lacey: And so what does that mean for the engineering teams who are deep in this? What kind of scramble is this set off inside Tesla?

Steve LeVine: So the Roadster, remember, was the first car that Tesla produced in 2008, and he had been promising a reboot of the Roadster for years, and now, he's going to do it. Now he says, "Okay, now, I'm going to do it. It's going to come out in 2026," and this means that the body crew, the battery crew, the electric motor, the whole powertrain, everyone has to be aligned in terms of the specs that he establishes for that vehicle, in this case, the Roadster. Now, if you're going twice as fast, that means that within the battery when you accelerate, that means that the lithium ions, the lithium that's in the battery is traveling from the anode to the cathode twice as fast. That means when you push down the accelerator, what that means is that the lithium is moving from one electrode to the other. Now you're saying, "Well, we want those electrons to move twice as fast," and you can't just say that, right? You have to set up the electrochemistry so that can happen without the lithium really getting gummed up in the anode in the cathode or getting lost in the electrolyte.

And when you move like that, you create heat, you can't have the battery overheat. Lithium is a highly volatile, a highly flammable metal, and one of the big challenges in electric cars is keeping it cool, keeping it under control. And so the two things that come to mind is that one, you have to make sure that the acceleration, that the electrochemistry is going to go as Elon dictated in his new orders and that you don't end up in a dangerous situation where one cell catches on fire and then you get a runaway situation, the whole battery can become engulfed in flames. Obviously, you want to avoid that.

Stephen Lacey: So that would be a big deal if that were the only thing that had happened that week. But that same week, Elon made an impulsive decision that would set Tesla on this radically different path from what investors had previously expected, one that would steer the company away from the more affordable model, the Model 2 to focusing on autonomous vehicle fleets, the robotaxis. You've reported extensively on this and your recent story uncovers what happened inside the company. How did that play out?

Steve LeVine: So there had been a report that that week, that consequential week, the last week of February, Elon had canceled the Model 2, but it turned out, I started looking into that and it turned out that Musk had had this series of meetings where he made a number of decisions, and so we don't know the order of the meetings that took place, but we know the meetings happened. So one meeting, he saw the Model 2, the latest version of the Model 2, which was on track to go into mass production next year. He saw the robotaxi where it is at right now, which is in the design studio just at the very first stages of being developed, and he saw the Roadster. When he saw the robotaxi, he was so bowled over by whatever it was he saw in it that he remarked to his team, "Wow, this looks great. Let's just do this." He scrapped the Model 2 on the spot and he said, "Let's do the robotaxi. We're doing the robotaxi first."

Stephen Lacey: This is wild. It is not what a lot of people expected, and it's wild because of what it does to the teams inside Tesla. There's some design crossover between the Model 2 and the robotaxi, which you write about in your recent story, but they're very different cars. Why is that such a radical move for the teams working on these cars, to suddenly slow or even pause the Model 2 work and then put it all into the robotaxi?

Steve LeVine: One thing to know is that a lot of people who work at Tesla are there because they believe in sustainability. They believe in the mission that was set 14 years ago to electrify the world and to help resolve climate change. The $25,000 Model 2, the one they were developing was the key to doing that, to getting there. That was going to be the 10 million cars a year by 2030 of those vehicles were going to be sold, and that was how they were going to get there. When you cancel the Model 2, you're messing with those people. That's the reason why they're at the company. But let's say that you're in it, that you say, "Okay, well, okay, Elon wants to do it this way, so let's do it that way." So you've been spending all of your time engineering that Model 2, getting the battery, getting the powertrain, getting the vehicle ready for mass production next year.

And that's no small thing, right? Because you're taking cars, right? The Model 3, the Model Y, these cost in the mid-30s and into the 40s when you're adding other features to them and suddenly you're saying, "We want a car that's 40 or 50% less." So you have to do all kinds of things, especially to the battery to get there. All of that work is put on the scrap, on the scrap heap, all that work that they did, they have done no work, almost no work on the robotaxi. So suddenly, he doesn't not only wants the robotaxis, but he wants it at the same time that the Model 2 would've come out, which is the second half of next year. And so very, very quickly.

It's not so much the powertrain, so the battery and the electric motor, all of that was going to be approximately the same. This is what I was told, but the body, a lot of what the aerodynamics that make a car work and that bring down the cost, all of those factors, all those design is in the body. And so those guys hadn't done any work at all. And so they have to go from basically a concept to a real car, a robotaxi, and a robotaxi means it's an autonomous driven car with no steering wheel and no pedals, in one year. No one outside the company and no one inside the company who I spoke to anyway believes that the robotaxi is ready to be without a steering wheel, without pedals. And even if it were ready, that it's ready for regulators are ready to say, "Yeah, go."

Stephen Lacey: I know it's really difficult to get inside the mind of Elon, but what's your read on what is happening here? I mean, if you look at the pressure from Chinese EV makers, there are dozens of new models, perhaps hundreds coming that are extraordinarily cheap and being adopted in mass. So you have a lot of pressure from Chinese automakers. And then if you look at the last decade and a half of autonomous vehicle development, we have seen substantial improvements in the autonomy, but certainly nobody is ready for level five autonomy, not even close. And a lot of companies have gone bankrupt or downsized. Apple just gave up on its autonomous car effort after a decade of development. You had some of the brightest AI engineers and automotive folks working on that program. Tesla itself is under federal investigation for securities and wire fraud for claims around its own self-driving system. Why is Musk running so hard into autonomy? What's your read?

Steve LeVine: We can reference in terms of getting into his mind. The best thing is Walter Isaacson's book because he sat with Musk for two years, fly on the wall, and that's priceless. Musk beyond what he said originally 14 years ago, what he said on battery day, what he said last year, and in the shareholders meeting and in all of those places, he was very enthusiastic about the Model 2, and, "It's going to blow your mind. You've never seen a car like this," and so on. You know the way he can talk. He blew hot and cold on, in fact, internally, he blew hot and cold. He was not excited about this car. He told Walter, "This isn't the most exciting thing that we're doing." I think there's some of that. Number two, there's a question in my mind about whether he thought that this was really going to be a Tesla, right?

So in his mind, what is a Tesla? And he's looking at the Model 2 mock-up that his design crew had put together, and in his mind, was it a Tesla? And three, and if it was a Tesla, would it hit the margins, the profit margin? Could it really be made at $25,000 with a healthy profit margin? And this is something that changed in him over the years. He didn't really talk about... I mean he did in his revenue meetings, I'm talking about profit margin and so on. He did talk about that, but he didn't make it that that was the core ethos of the company. "I'm going to be a super valuable company, I'm going to make a lot of money." But recently, that changed. So he told Walter Isaacson, he's talking about the robotaxi, "This is the car that's going to turn us into a $10 trillion company."

Now why do you say that? Why is that on your mind? "I want to be a $10 trillion company." Was that something he said in his master plan number one in 2006, master plan number two, 2016 or his most recent one last year? No, he didn't say that. And so something shifted in his mind. Somehow, I have to be a valuable company. Somehow in his mind, "If I'm Elon Musk, one of the richest guys in the world, I've got this space company, I'm going to land on Mars," all of these things. "I also have to have this company that's super valuable and making this margins." That's part of the decision too, because when he's describing, "We're an AI company, we're a robotics company. If you think we're a car company, do not invest in us." He said this recently, he said this over the last month.

And so if you've got all these things on your mind, then maybe you do jump and say, "We're going to figure this out. We're going to be an AI company. We're going to do the robotaxi." I personally think it's not rational. I think that you go ahead with the Model 2. If you want to make the robotaxi, you're doing that in parallel with that, you're investing $10 billion a year, that's what he's investing in. Dojo, the chip and Optimus, the humanoid robot and robotaxi. And he says, "If you're serious about AI, about winning, you have to spend that amount of money per year. And if you're not spending that amount of money, you're not in the game. You're going to lose." I think it's not rational. Wall Street has told him it's not rational, and he's backpedaled right after Wall Street. And when I say Wall Street, I mean that the numerous analysts wrote reports saying, "We don't believe that Musk really canceled the Model 2, because that would be insane." They didn't use the word insane, but they use synonyms for that.

Stephen Lacey: Further making everyone dizzy. There was another move that caused confusion in the electric vehicle market. In mid-April, Musk announces major layoffs across the company because of lagging sales. A senior leader wrote an email to the supercharger team at that time saying, Musk believed their work was critical, which you reported on. And then two weeks later, that supercharger team was gone. Leadership was scrapped. The whole team was fired. Why was that such a head-scratching move?

Steve LeVine: The supercharger team especially, those are the crown jewels of Tesla. People are not going to buy an electric car, ordinary, I mean mainstream, you and me, right? We're not going to buy one unless we think we can charge it up when we want and fast. Musk, from the beginning, understood that and built, ahead of demand, this global supercharger network across the United States and across the world, these places that not only charge fast, not only were convenient, but were pleasant to go to. You wanted to go charge. I have friends who go charge their car and sit in the back seat and play video games. This is fun, right?

And now, Musk has said, "Well, actually, we're not going to build them at the rate we were, and I'm firing the entire team in charge, 500 people and the person in charge of that team, I'm firing all of them." It is not just head-scratching, it's mystifying. You get rid of the team responsible for your most valuable asset, and you put all the bets of your company, you bet the company on a technology that isn't anywhere near ready for the market. All of these things together, they're not rational. They are not rational.

Stephen Lacey: Tesla's always been a really chaotic company to cover, but this feels kind of different. And I wonder if you can give us the market backdrop about why this moment is different for Tesla. You've got a slip in sales. We've got pressure from EV makers in China, factory delays. What is happening in the EV market generally that is putting more pressure on Tesla and perhaps forcing Elon's hand to make some of these moves that are baffling folks?

Steve LeVine: This question can be divided into two. One is why is this... So he's faced other challenges. There have been other crises in Tesla history, and there have been moments where he fired 10, 15% of the company. 2019, 2022, the most recent ones. There have been numerous times Musk himself has narrated when he thought the company was going to go bankrupt. But all of those times, there's the Model S, there's the Model 3, there's production hell, there's the Model Y, I'm running out of money, calling all his friends before the midnight deadlines to try to get them to pour money into the company. But those were different because each one of those was him advancing the development of electric cars. "Okay, I have this model that cost 125,000, now I'm going down to 80,000 and then 50," and so on. You could see the progression. There's something rational there. Even if you didn't believe that it would work, it made sense. This one makes a lot less sense.

The second part of this, what are the things that are happening? One is that the mainstream market outside China has not bought into electric cars. So the non-Chinese market almost around the world, not everywhere, there's some countries that have bought in, but generally speaking, and so they have to be convinced, and the way they'll be convinced is that the price needs to come down and there needs to be fast charging everywhere and a number of these things. But it's uncertain. It's uncertain how quickly those markets are going to develop. But we have is a signal from first movers, tech first movers, the first people who bought the iPhone. It's those kind of people who have bought the first Teslas, the first electric cars.

Look at all the other companies, their sales, Volkswagen, Ford, GM, they're selling their cars in the thousands or the tens of thousands. It's only two companies that are selling their cars in the high hundreds of thousands and millions. It's Tesla, we already said, and China's BYD. So that's one thing happening. The second thing happening is that the one place where mainstream buyers have bought in is China, right? So China has built capacity-enough battery and EV capacity to supply the whole world, but obviously, there isn't a market in China for that many cars, for that many batteries. And so they're pushing outside of China. China has become the largest exporter of cars in the world just over the last year. China sells more EVs by far than any country in the world, and it's state-of-the-art. Chinese batteries, the whole supply chain and Chinese EVs can compete with anyone's EVs around the world, including Tesla, including Lucid. Lucid is a fantastic electric car as well.

And so Musk is seeing that, okay, he's going to come out with his $25,000 car, but it's unlike when he came out with the Model 3 or the Model Y. Those cars were all by themselves. They were competing against nobody. The Model S, the same thing. Roadster, the same thing. Now he's coming out with Model 2. He has competition. So that car not only has to meet all of the metrics that we already stated about cost, but it also has to be distinct, distinguished from everyone else's car. Whereas the robotaxi is not. If he really does produce the robotaxi next year, that will stand alone.

Stephen Lacey: Elon is a well-known chaotic leader. One executive told you he turns the barge like it's a speedboat. He decides things publicly, seemingly on a whim, and then doesn't share them with his team, and then they find out via an earnings call or an X post. His behavior in the last couple of years seems less predictable than ever. What are people saying about him inside the company as he's making some of these decisions? What's the vibe you're getting?

Steve LeVine: Negative. So I should say the people I talk to are hardware people. So there are people doing batteries, there are people doing vehicles. Their rationale for being with the company has been turned on its head. "I'm going to do something about climate change. I'm going to make the kick-assingest battery in the world that's going to make everyone want this car. I'm going to make the coolest looking car." These things were all turned on their head, and it is. So there was an unhappiness that Musk stepped away from the company for the last two years when he bought Twitter and was focused entirely on it, letting go everyone there. Remember, he really scaled back. Suddenly has a political agenda, which he didn't have before. Now, he suddenly pops abruptly into Tesla after all this time and on the spot, turns everything upside down. That has made the team dismayed, unhappy, and lacking confidence in Musk's leadership.

Stephen Lacey: Steve LeVine manages and writes for The Electric, a publication from The Information. It's focused on next generation batteries, electric vehicles, autonomous driving, other energy transition subjects, and your reporting on Tesla has been phenomenal. So thank you so much for taking a break from the chaos and sharing us some of your insights.

Steve LeVine: Thank you, Stephen.

Stephen Lacey: And that's going to do it for the show. If you want to check out Steve's reporting on Tesla, we'll have a link in the show notes and The Carbon Copy is produced and written by me, Stephen Lacy. Sean Marquand is our technical director. He also wrote our theme song. If you want to get other industry news on the companies and trends in the battery industry and beyond, go to latitudemedia.com and you can sign up for our newsletter there. We also have some events coming up that you should definitely check out. They're both remote events, so it's easy for you to attend. On May 30th at 1:00 PM Eastern, we are going to be collaborating with Origami Solar to unveil some new research on how recycled steel can help reinvigorate the US solar industry. By switching from aluminum to recycled steel, solar producers can actually reduce greenhouse gas emissions, qualify for IRA domestic content incentives and help blunt supply disruptions.

So if you've got questions on the shift to steel, come attend at May 30th at 1:00 PM Eastern. You can register at latitudemedia.com/events. We're also holding one. I'm hosting this one as well. It's on June 13th at noon Eastern. It is with Ahmad Farooqi, Scott Engstrom of GridX, and we're looking at rate design, modern rate design, how it can make or break the energy transition. Fascinating topic as we look beyond solar net metering, how to compensate batteries, how to make demand response programs better, electric vehicle charging. There's a lot of new stuff happening in the market that's really critical for rate design. Again, that's June 13th at noon Eastern. Both of those are free events. And catch us next week here on The Carbon Copy. I'm Stephen Lacey. Thank you so much for listening.

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