Why Tesla’s Future Looks Riskier Than Ever

Key Concepts

• Tesla's Core Business: Electric Vehicles (EVs), Battery & Energy Storage Systems, Charging Services (accounts for 95-96% of revenue).
• "Hopeium" Projects: Elon Musk's focus on future, non-core ventures like RoboTaxis, AI, and Optimus humanoid robots, which are currently ideas, not established businesses with projectable earnings.
• Q1 2024 Results: Tesla's worst quarterly results in four years, including a 71% drop in net income.
• Elon Musk's Brand Toxicity: Musk's public persona and controversial statements are negatively impacting the Tesla brand.
• Product Gap: Lack of new, compelling mass-market EV models; reliance on refreshed or decontented versions of existing models (Model Y, Model 3).
• Model 2 / CyberCab: A potential lower-priced ($26-27k) vehicle project, currently slated only for RoboTaxi fleets, seen by some as a missed opportunity for a standalone consumer EV.
• LFP Batteries: Lithium Iron Phosphate batteries, sourced from China (CATL), crucial for Tesla's energy storage business, now facing prohibitive tariffs (145% markup).
• Tariffs: Impacting Tesla, particularly the energy storage business due to reliance on Chinese LFP cells, and potentially other components (steel, aluminum, electronics).
• RoboTaxi Launch: Planned launch in Austin, Texas (June, starting with 10-20 vehicles), viewed as a potential bright spot but facing concerns about being rushed and safety implications.
• ZEV Credits: Zero Emission Vehicle credits (regulatory credits) sold to other automakers, a source of revenue for Tesla, but unpredictable quarter-to-quarter.
• Investor Sentiment: Growing concern among investors about the focus on speculative projects over the core business and the need for Tesla to deliver on promises.

Tesla's Current Financial and Business State

Alan Ohnsman highlights Tesla's precarious current situation, underscored by its Q1 2024 results, which were the worst in four years, featuring a significant 71% decline in net income. While Elon Musk promotes future ventures like RoboTaxis, AI, and the Optimus humanoid robot program, Ohnsman categorizes these as "ideas" or "hopeium" rather than concrete businesses. These ventures lack modellable earnings projections for analysts. The core business – comprising EVs, battery/energy storage, and charging services – accounts for 95-96% of Tesla's revenue and is facing significant challenges across all three areas. There is no indication that the problems plaguing Tesla in Q1 (primarily declining EV sales) have been resolved heading into Q2.

Elon Musk's Role and Impact

A central theme is the detrimental impact of Elon Musk's persona and divided attention on Tesla. Ohnsman argues that Musk's brand, along with his own image, has become "toxic for many people." Despite Musk returning to focus more on Tesla after stepping back from "day-to-day Doge activities," his time remains split across numerous ventures (SpaceX, X, Neuralink, Boring Company, etc.). Ohnsman suggests the "best thing for Tesla would be a management change" to bring in a "fresh face" and less controversial leadership, which could be a "net positive" for the brand and investors, despite potential pushback from loyalists. Musk's acknowledgement of poor numbers and blowback is seen as insufficient; during the earnings call, he reportedly blamed criticism on "paid protesters" and "disgruntled government workers," dismissing the genuine anger among some consumers and former owners. Ohnsman traces Musk's reputational decline back to the Twitter acquisition in 2022, citing a history of controversial, sometimes "racist, misogynistic, anti-trans, anti-semitic" comments.

Product Strategy and Challenges

The lack of fresh product in the core EV business is identified as a critical weakness. Current efforts focus on a refreshed Model Y and planned lower-cost, "decontented" versions of the Model Y and Model 3. Ohnsman argues this strategy is weak, as cheaper versions of existing cars rarely attract significant new business and directly compete with readily available, feature-rich used Teslas. A major missed opportunity, according to investor Ross Gerber (cited by Ohnsman), is the shelved "Model 2" project – a smaller, potentially $26,000-$27,000 two-door model shown last fall. Instead of being offered as a standalone consumer EV filling a market niche, Musk has stated it will only be sold as a RoboTaxi fleet vehicle. Ohnsman and Gerber argue that releasing it as a standard EV would be the "simplest solution" to boost sales. The Cybertruck is deemed "too nichy" and not a volume seller, while the Tesla Semi targets the relatively small Class 8 commercial truck market, unlikely to significantly impact the bottom line compared to mass-market EVs like the successful Model Y and Model 3. The core argument is: "the simplest fix is new product."

External Factors: Tariffs and Competition

Tariffs, particularly those impacting Chinese goods, pose a significant threat. While Tesla sources heavily domestically for cars sold in the US, it relies on Chinese LFP (Lithium Iron Phosphate) battery cells from CATL for its energy storage business. New tariffs impose a 145% markup on these cells, making them economically unviable. This cripples a previously booming segment (energy storage was a Q1 bright spot) as domestic LFP cell manufacturing plans with CATL technology are also stalled by the tariffs. Ohnsman predicts the energy storage business will "get hammered in Q2." Other components (steel, aluminum, electronics from Japan/Korea) could also face cost increases. Competition is intensifying. While many lower-cost competitors are Chinese and not sold in the US, a significant domestic competitor is emerging: the third-generation GM Bolt, expected later this year. It's anticipated to be fully redesigned, priced under $30,000, offer around 300 miles of range, and compete directly in the urban EV space where Tesla lacks a new offering (a space the Model 2 could have filled).

Future Prospects: RoboTaxis and Investor Sentiment

The upcoming RoboTaxi service launch in Austin (June, starting small with 10-20 vehicles) is presented as a potential, albeit uncertain, bright spot. However, concerns exist, citing a Business Insider report suggesting the project might be "rushed" to meet the June deadline, raising safety flags. Ohnsman contrasts this with Waymo's cautious, multi-year development and rollout. While acknowledging the surprisingly rapid public acceptance and normalization of RoboTaxis (using the Los Angeles Waymo launch as an example), the immediate profitability and revenue generation potential of Tesla's service remain unknown, especially considering potential high backend monitoring costs. A key question is how long investors will remain patient. Ohnsman notes the tendency to believe Musk can continuously work miracles based on past successes with Tesla and SpaceX. However, he cautions that "past performance is no indicator of future performance" and points to a history of missed targets and unfulfilled promises (solar roofs, battery swapping, 20 million EVs/year, earlier RoboTaxi timelines). There's a growing sense that investors might demand more focus on the core business (EVs, batteries, charging network expansion) and tangible results ("prove it") rather than aspirational projects. 2025 is framed as potentially a "make or break year" where Tesla must start delivering on its grander promises.

Synthesis/Conclusion

Tesla faces a confluence of serious challenges. Its core EV business is suffering from declining sales and a lack of new products, while its previously strong energy storage division is severely threatened by tariffs on essential Chinese battery components. Elon Musk's leadership is increasingly seen as a liability due to his controversial public persona and focus on speculative, long-term projects (RoboTaxis, AI, robots) at the expense of immediate core business needs. While the upcoming RoboTaxi launch offers a glimmer of potential, it's fraught with uncertainty and safety concerns. Investor patience may be wearing thin, with growing calls for Tesla to refocus on delivering tangible results in its established markets rather than relying on future promises. The company appears to be at a critical juncture, needing to address product gaps, navigate external economic pressures, and potentially reconsider its leadership and strategic focus to reverse negative trends.