With the Model 3 finally rolling out of a bustling factory and Tesla poised to take its place among mainstream automakers, perhaps the time has come for Elon Musk to step aside from the day-today of building cars. He could focus on some of his other grand ideas for changing the transportation world: his rockets, tunnels, and hyperloops. Simply put, he possesses far too much talent and ambition to run an automaker.
If Musk sincerely wants Tesla to usher in a new era of transportation, one in which everyone whisks about in electric vehicles powered by the sun, he might do better to find someone suited to the mundanity of the task. Musk is a rare talent, a brilliant visionary unafraid to pursue big, crazy dreams. He is exactly the type of person you need running a company elbowing its way into the auto industry, which he has done.
But Musk is ill-suited to Tesla’s next phase, one in which it must master all the boring stuff old automakers have spent a century perfecting: nailing efficiencies, meeting deadlines, solidifying supply chains, wrestling with labor, and squeezing profits out of remarkably narrow margins.
That’s not to say Musk should drive his shiny new Model 3 into the sunset. Tesla aspires to be an energy company, one that sells solar panels and enormous batteries to complement its sexy electric vehicles. That is precisely why Musk should relinquish his role as CEO, stop wasting his time hanging out on the assembly line, and devote his talents to mapping out that new world—while also figuring out how to colonize Mars, prevent the AI apocalypse, and drill under LA.
“Elon Musk would probably do well to elevate himself to the role of supreme leader, visionary, and soul of the company, and hire one or two really solid auto professionals who know how to run the business,” says Bob Lutz, an auto industry veteran who most recently served as GM’s product chief.
Musk wouldn’t be the first. Larry Page and Sergey Brin at Google, Bill Gates at Microsoft, and Howard Schultz at Starbucks all stepped back from quotidian operations to focus on bigger things. Musk must do the same, for his sake and Tesla’s.
The Car Business
Friday’s Model 3 launch marked Tesla’s transition from startup to established automaker with Muskian ambitions. The South African-born CEO wants to build 5,000 Model 3 sedans each week by the end of the year, and double that in 2018. As Tesla continues cranking out Model S sedans and Model X SUVs, Musk aims to sell half a million cars next year, a sixfold increase from last year. It could be the fastest ramp-up in automotive history. Or a colossal failure.
“If they don’t have somebody inside the company that is a master at building vehicles and establishing supply lines and lean manufacturing and dealing with the labor component, they’re going to struggle,” says Jeff Owens, the former CTO of Delphi, a major industry supplier.
Tesla has little room for error. The average car features roughly 3,000 parts, each of which must fit together perfectly. They come from hundreds of suppliers, and if any one of them fails to arrive in the right form, the right number, or at the right time, production can break down. Get it all right, and Tesla can expect to see a profit margin of no more than 6 percent. Get it wrong and, well, the company might as well burn the money. At least it would save on heating bills.
Tesla has yet to turn a profit in the five years since it started selling the Model S, and the company shows little regard for deadlines. The S arrived about a year after its original due date, and the X nearly two years late. Yet investors show little concern. Earlier this year, Tesla’s valuation surpassed that of Ford and (briefly) General Motors. But even if investors continue showing patience, losing cash is never a good look. Anyone tasked with making the Model 3 profitable faces grueling work.
“It is an all-consuming, double digit-hour day job, six or seven days a week,” says Tony Posawatz, a former General Motors engineer who has led multiple product lines, including the development of the hybrid electric Chevrolet Volt.
As a rule, auto industry CEOs rely on seasoned, trusted lieutenants to get the job done. Even at a smaller outfit like Tesla, you need to spread the responsibility. “A flat management structure where everything comes to Musk is untenable at a certain volume level,” Owens says.
Musk did hire Audi veteran Peter Hochholdinger last year to run production. He swiped Charles Kuehmann from Apple to head up materials engineering and tapped top battery researcher Jeff Dahn. But nothing suggests he has relinquished control. The self-described “nano-manager” famously sweats the minutia of Tesla’s operations. In a May 2016 conference call, he boasted he had moved his desk to the end of the Model 3 production line in Tesla’s Fremont factory and kept a sleeping bag in a nearby conference room.
Beyond consistently blowing production deadlines, Tesla struggles with quality control. Musk claims he has learned from past hiccups, and made the Model 3 as simple as possible to ease production—no falcon doors or other frivolities, for example, and more straightforward steel construction instead of aluminum. Still, the addition of another car, with its own architecture, software, and materials, makes it even harder to get this right, especially since its far lower base price will make any mistakes all the more costly.
The Boredom Company
Musk may now be synonymous with Tesla, but Martin Eberhard and Marc Tarpenning founded the automaker in 2003. Musk came aboard as chairman of the board a year later, after selling his share of Paypal to eBay. He helped design the Roadster, Tesla’s remarkable proof of concept, but only immersed himself in the details of the business when he took over as CEO in 2008.
Beyond running Tesla, he keeps busy leading SpaceX and OpenAi, the artificial intelligence venture he founded in 2015 with Sam Altman. He spends some time on Neuralink, a company trying to merge the human brain with computers. He hosts competitions for students designing the hyperloop, the tube-based high-speed transportation network he dreamed up. Then there’s the Boring Company, which he created to dig traffic-killing tunnels … somewhere. “We have no idea what we’re doing—I want to be clear about that,” he said of his mole mission in January.
If all these projects, plus his tweets praising floors (“I love floors”) indicate he’s getting bored of the car business, that’s more a feature than a bug of his personality. Musk bounces from one idea to the next because they just keep coming to him. That’s another reason to rethink his role at Tesla.
Musk is spark and kindling, the oh-so-rare person who combines bold ideas, the smarts to make them happen, and the salesmanship to convince others to climb aboard. Plenty of people can manage supply chains and track production numbers. Few can make serious progress toward colonizing Mars, manifest an industry dedicated to stuffing people into high-speed vacuum tubes, and make a serious (if not convincing) argument that the trick to conquering traffic is a massive network of tunnels.
A New Role
The question, then: Why doesn’t Tesla ask Musk to take a step back from daily operations, focus on the big picture, and rely on competent and experienced lieutenants with the autonomy to do their jobs? Why waste his talent for innovation and creating enthusiasm on building cars? And though Musk recently told investors he’ll stick around as long as Tesla will have him, back in 2013, he said he’d consider leaving Tesla once the Model 3 reached the market. So clearly, he’s at least considered it, even if not recently.
For models, Musk could look to Google co-founders Larry Page and Eric Schmidt, who have moved in and out of daily management at Google. Page now leads Google parent company Alphabet, lifting him far above the noise of the daily work (he’s also running a flying car project). Brin ran Google X, the shop for out-there inventions, and is developing an airship on the side. Or Musk could make like Bill Gates, who ceded the day-to-day running of Microsoft to Steve Ballmer when he stepped down as CEO in 2000. (Gates surrendered his chairmanship in 2014, and now runs one of the world’s largest philanthropic organizations.)
“The best leaders know when to transition, when to bring in expertise of other kinds,” says Patricia Lenkov, founder of headhunting firm Agility Executive Search. “When they don’t you end up in crisis mode.” That crisis hasn’t arrived yet, but the scale of the Model 3 project, and the likelihood that at least something will go wrong, could easily change that.
If he really likes the CEO title, Musk could follow Mark Zuckerberg’s route, and hire a Sheryl Sandberg-type figure as a COO, someone to buckle down on operations and the like.
If Musk does choose to hand his CEO crown to someone focused on daily operations, his chairmanship of the Tesla board and close ties to most of its members would let him retain much of his clout. Along with brother Kimbal Musk, the board includes investors in Musk’s other projects, including SolarCity (which Tesla acquired last year), and SpaceX. (Musk added two new independent directors last week, after investors complained the CEO was too tight with the board).
He’s got plenty of good CEO candidates to choose from. He could hire recently canned Ford CEO Mark Fields, who with his predecessor Alan Mulally helped Ford dodge bankruptcy and grow quickly over the past decade. He could bring in someone with lower profile figure like Pam Fletcher, an engineer by training and now GM’s head of autonomy and electrification. He could promote from within, naming production chief Peter Hochholdinger his successor.
Whatever the route, Tesla should keep Musk as its public face, its chief champion and salesman. His magic touch is too valuable to abandon—and too valuable to waste.