EVs a sideshow in Musk compensation win

Musk's victory parade made little mention of Tesla's vehicle production

EVs a sideshow in Musk compensation win
Musk focused on Optimus and autonomy following his victory in the shareholder vote

Tesla CEO Elon Musk scored a personal win with re-approval of his c.$56bn compensation package following a shareholder vote. But the retail investor fanfare that accompanied the vote was squarely focused on the moon-shot growth prospects of mass-scale robotaxis and the Optimus humanoid robot, with Tesla's EV sales barely mentioned.

In fact, an uninitiated observer of the at times self-congratulatory press conference following the vote would hardly know that Tesla makes cars.

Musk has, admittedly, clearly indicated that he wants Tesla to become an AI and robotics company. But without growing its EV sales, including a promised more affordable vehicle to come as early as late 2024, Tesla revenue will stagnate or even dwindle in the years before its FSD software is able to roll out to the extent that Musk and doting retail investors envision.

And the ruling also does little to assuage the same legal concerns that struck down the compensation package when it was first introduced in 2018 — the worry that Tesla's board is not sufficiently independent from Musk and that the CEO exercises undue influence on its decisions.

Indeed, the board, which incudes among its member's Musk's brother and former personal attorney, campaigned strongly over recent weeks in favour of shareholders re-approving the package. While the compensation plan is once again approved by stockholders, it may still face legal challenges, particularly from several powerful institutional investors that came out against the motion — even aside from the fact the package is dependent not on this vote but on overturning the Delaware court decision.

But Musk is in a bullish mood. In line with equity firm Ark Invest, he predicts that Tesla's market cap will reach a $5-7tn range by 2029.

And the CEO once again laid out a vision for a future wave of growth for the firm driven by a mass conversion of the existing Tesla fleet into monetisable self-driving robotaxis.

"Tesla will own some cars, but customers can add their cars to the fleet with a tap on the Tesla app, making money whenever they want," Musk told investors after the event. "You can add or remove your car for hours, days, or weeks.

"The revenue will exceed the monthly payment. This will happen, mark my words," he adds.

But just as Musk's victory in the shareholder vote does not address legal concerns about the independence of the Tesla board, nor does it change the incredulity of some onlookers at Musk's grand promises, such as his oft-repeated claim that autonomy could increase the value of Tesla tenfold.

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And noticeably absent from Musk's speech and Q&A session following the vote was any discussion of near-term plans for mass market EVs, the revenue source that will have to bridge the gap for Tesla until its autonomous driving software becomes a commercially viable proposition. This is despite Musk reassuring analysts at the company's most recent earnings call that some kind of next-generation EV would be coming to market as early as late 2024.

Instead, Musk's only reference to tangible EV production strategy was revealing that Tesla sees a "difficult path" to achieving cost parity between its internally produced 4680 cells and its supplier-bought cells by the end of 2024.

And it is not as if there is no recent material news affecting Tesla's short-term automotive revenue. As part of the recent EU tariffs placed on Chinese-made EVs, Tesla's Shanghai-manufactured cars will now face duties in the bloc possibly even higher than Chinese brands BYD and Geely, although the European Commission says that an "individually calculated rate" may be applied to Tesla's imports.

And if Tesla's autonomy plans were as certain as Musk lets on, we might have expected to have heard more details about what the company plans to unveil in August under the name 'robotaxi', rather than the radio silence seen since the initial announcement.

While it may be no secret that Musk is steering Tesla away from conventional EV manufacturing, the sense emanating from the company is that futuristic obsessions are dominating, leaving a void of near-term planning that is becoming increasingly conspicuous.

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