Tesla currently finds itself in quite a dilemma: the company’s core business is in free fall, with Elon Musk at the helm.

However, now that Tesla’s stock is firmly in the “meme stock” category, it would likely crash without him pumping it.

Nothing can prove that Tesla is a meme stock that trades on vibes more than the stock going up 20% this week after it reported its worst earnings in years and came in way below expectations.

Tesla’s earnings trends point to a company in a difficult situation:

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Tesla’s vehicle deliveries have been declining since 2024, along with its automotive gross margins, despite a rise in EV sales globally.

Last quarter, Tesla would have lost money if it weren’t for the sale of regulatory credits, despite energy storage sales surging.

Energy storage is Tesla’s only silver lining. Still, the company has warned that it could become problematic since it relies on inexpensive Chinese battery cells, which are now subject to tariffs. Furthermore, the competition is intensifying with companies like CATL and BYD, which supply battery cells to Tesla’s energy storage products, having launched competing products.

With Tesla’s EV sales dropping, in part due to Musk alienating half of Tesla’s customer base, and in part due to his leadership pushing for autonomous driving rather than a more diverse vehicle lineup, the automaker is in clear need of new leadership.

Musk is becoming too political and controversial to be the face of a consumer product company, and he is splitting his time with six different projects, making significant mistakes in the process.

Under Musk, Tesla has launched a single new vehicle in the last 5 years, the Cybertruck, and it has been a total commercial flop. He has been consistently wrong about when Tesla would solve self-driving for the last 10 years. Most CEOs would have been fired by now.

At this point, it is difficult to argue that Tesla’s business would not benefit from new leadership.

However, there is one aspect of Tesla that would not benefit from Musk leaving: Tesla’s stock. It currently trades at an insane 165 price-to-earnings ratio amid declining earnings.

That’s unheard of in the auto industry, and it is also extremely rare in the tech industry, in which Musk attempts to position Tesla to justify such a high P/E even though most of its earnings are still tied to selling cars.

The only reason Tesla is currently able to maintain this is the fact that there are a surprising number of people who believe Musk when he says that Tesla is on the verge of solving “real-world AI”, which refers to self-driving vehicles and humanoid robots.

That’s it.

Tesla’s stock price has basically become an index of how much investors trust Musk’s claims about Tesla’s self-driving and robotic efforts – because no one can argue that it has anything to do with Tesla’s core business and fundamentals since those are in free fall and would justify Tesla trading at about a fifth of its current valuation.

Therefore, the stock price relies on people believing that Musk, who has been consistently wrong about Tesla solving self-driving and never releasing any data to prove otherwise, is right this time about Tesla being on the verge of solving the problem and ahead of the competition.

If Musk leaves, those people would likely take the stock with them, resulting in a potential crash.

Electrek’s Take

That’s quite the conundrum.. for some. For me, you save the business and not the stock. The stock will eventually come down at some point anyway. The business of selling millions of EVs is actually good for the world and employs about 100,000 people.

Musk has been able to keep things going for a long time, to his credit, with the hope that Tesla will eventually catch up to his hype, but it looks like the most likely outcome is that he can only keep things going until other companies start to scale their autonomous driving efforts.

Waymo is already completing 250,000 autonomous rides per week in the US. Musk has been able to make his cult ignore that by claiming that it’s not scalable, even though those weekly rides have more than doubled in the last year.

In China, Baidu, WeRide, PonyAI, and others are already becoming mainstream.

As those efforts become more popular and the number of people who use them regularly reaches the millions, it will become harder for Musk to present Tesla as a leader in autonomy while carrying a decade of missed deadlines.

I think Tesla has a real shot at solving general autonomy, but I believe it will happen closer to 2027-2028, with a new hardware suite. By that time, Tesla will have plenty of established competition, in addition to Waymo, and it will carry the significant liability of having promised self-driving capabilities on millions of HW3-4 vehicles that it cannot deliver.

This is not a great situation, and it’s entirely because of Musk.

However, he has his position at Tesla secured. Even Tesla shareholders who have serious doubts about Tesla’s self-driving efforts don’t want to oust him on the off-chance that he might be right. This points to most of Tesla’s value currently lies in the mystique of Musk being a “super genius.”

You often see it on social media. When someone criticizes Musk or Tesla, instead of providing a counterargument to the criticism, Musk fans will simply attack the messenger and ask: “Who are you to question Musk? How many rockets have you landed?”

This is cult behavior. You can’t question the leader. It’s a perilous situation that rarely has a happy outcome.

Musk is smart, and his companies have achieved incredible things under his leadership, but that doesn’t mean he is a super genius who can’t make mistakes.

He has been wrong many times and has lied on numerous occasions. He has proven himself willing to lie and mislead people for his own benefit. That’s not someone you should put your trust in. People, especially in the US, tends to assign a ton of value to someone who has amassed wealth.

I am not someone who automatically thinks someone is bad because they are a billionaire. However, I also know that if you are somewhat intelligent, connected to wealthy individuals, and have low morals, it is fairly easy to accumulate wealth. I think Musk fits this category with a messiah complex on top of it.

I am curious to know if anyone sees a way out of this conundrum for Tesla at this point. As a fan of Tesla’s original mission to accelerate the advancement of electric transportation, I believe Tesla can still contribute to that goal, but not with Musk at the helm.

Yet, the only people who can kick Musk out are Tesla shareholders, and as described above, they are incentivized not to push him out because it would likely lead to a significant decline in Tesla’s stock price.

What can be done? I’ll hang out in the comments to see if you have ideas.