Investor's Corner
It’s clear, Tesla needs a COO and it can’t come soon enough
Tesla’s stock price has fallen nearly 24% in the last month, with the majority of the decline occurring this week. The drastic change isn’t really attributable to a single factor. The company is under pressure across the board, from Model 3 production, Solar Roof delays, concerns of a cash crunch, and delays in Autopilot’s Full Self-Driving capability. While there isn’t one solution to solve all of Tesla’s growing pains, hiring a Chief Operating Officer could help bring some operational stability to the company while curbing any overpromises made to customers and investors.
Elon Musk has been the CEO of Tesla for the past 9.5 years, and with a newly approved multi-billion dollar compensation plan, signs point to Musk taking the reins for at least another 10 years. However, Musk isn’t committing solely to Tesla as he’s also the CEO and CTO of SpaceX, CEO of Neuralink, CEO of The Boring Company, and one can argue that he’s also a full-time Twitter persona.
In his other companies outside of Tesla, Musk has a key executive running the business operations. President and COO Gwynne Shotwell joined SpaceX as the 11th employee in 2002 and has turned Musk’s passion for Space into a business with over $12 billion in order contracts.
Although Tesla has nearly six times more employees than SpaceX, the young space company operates efficiently and akin to a well-oiled machine, according to employees working at SpaceX. Yet, at the same time, Tesla has seen high executive turnover, as Musk holds tight control of the company’s day-to-day management.
Tesla’s need for a “Shotwell Equivalent” is more apparent than ever and for these key reasons:
- Model 3 Production: Bloomberg’s Model 3 production tracker shows that they are below 50% of their end of March production rate target. Musk should have never increased production targets on the vehicle and needed to be far more conservative with his estimates.
- Continuous delays with Autopilot technology: After ditching Mobileye’s technology in autopilot systems 21 months ago, Tesla’s development of the technology has slowed significantly. Musk first said that a Tesla would be able to drive coast-to-coast autonomously by the end of 2017, that has now been moved to mid-2018.
- Need to capitalize on Model S and Model X. Tesla has built a high-margin business out of their Model S and Model X vehicles. At current production rates, the company can generate $2.5 billion in free cash flow from those two vehicles alone. Tesla should use strategic marketing to boost demand for the vehicles, allowing the company to bring in more high-margin revenue.
- Acquisition of SolarCity: Tesla’s acquisition of solar installation company, SolarCity, has failed to provide meaningful value to shareholders. From the outside, it appears as though Tesla’s management team doesn’t have the bandwidth or cash to grow the Solar division. Both of Musk’s cousins Peter and Lyndon Rive have left Tesla after the acquisition to “focus on other projects”.
It would be foolish to think that a COO would solve all of the company’s issues, but having a dedicated executive to manage day-to-day operations could certainly help in preventing executive turnover while keeping employees focused on Tesla’s core mission: to accelerate the world’s transition to sustainable energy.
Who could be Tesla’s new Chief Operating Officer?
I’ve prepared a shortlist of executives that could potentially land themselves as Tesla’s first COO.
1. Mike Sievert (COO of T-Mobile US)
While Sievert doesn’t have automotive experience, he does bring strong experience managing a large employee base and has worked in the technology sector for the past 25 years. Sievert joined T-Mobile in late 2012 as CMO and became COO in 2015. Since joining T-Mobile, Sievert has been crucial to the company’s successful turnaround. And to boot, Sievert has experience working with outspoken CEOs who also moonlight as a Twitter personality.
2. Julia Steyn (VP Urban Mobility at General Motors and CEO of Maven)
Steyn joined General Motors in 2012 as VP of Merger and Acquisitions and became the VP of Urban Mobility and CEO of GM’s Maven division in late 2015. She has led the company’s initiative into car-sharing with the Maven division and has played a key role in GM’s moves into autonomous vehicles. Prior to joining GM, Steyn was VP at Alcoa, one of the world’s largest aluminum suppliers. She also spent 7.5 years at Goldman Sachs as VP of the Global Natural Resources Group in the Investment Banking division.
3. Alicia Boler Davis (EVP, Global Manufacturing and Labor Relations, General Motors)
Boler Davis has spent the last 24 years at General Motors in a variety of capacities and became EVP of Global Manufacturing and Labor Relations in 2016. She oversees over 150,000 employees in the manufacturing division of GM across 150 different facilities. Prior to her current role, she was SVP of Global Connected Customer Experience where she played a role, like Julia Steyn, in GM’s expansion into car-sharing and autonomous vehicles. Her extensive engineering and managerial experience at GM could bring more order and stability as the company plans to expand production across the globe.
Obviously, this list isn’t comprehensive but should provide a starting point for potential hires. Who do you think should be hired as the first Chief Operating Officer at Tesla?
Tesla has scheduled its Earnings Call for Q4 and Full Year 2025 for next Wednesday, January 28, at 5:30 p.m. EST, and investors are already preparing to get some answers from executives regarding a wide variety of topics.
The company accepts several questions from retail investors through the platform Say, which then allows shareholders to vote on the best questions.
Tesla does not answer anything regarding future product releases, but they are willing to shed light on current timelines, progress of certain projects, and other plans.
There are five questions that range over a variety of topics, including SpaceX, Full Self-Driving, Robotaxi, and Optimus, which are currently in the lead to be asked and potentially answered by Elon Musk and other Tesla executives:
- You once said: Loyalty deserves loyalty. Will long-term Tesla shareholders still be prioritized if SpaceX does an IPO?
- Our Take – With a lot of speculation regarding an incoming SpaceX IPO, Tesla investors, especially long-term ones, should be able to benefit from an early opportunity to purchase shares. This has been discussed endlessly over the past year, and we must be getting close to it.
- When is FSD going to be 100% unsupervised?
- Our Take – Musk said today that this is essentially a solved problem, and it could be available in the U.S. by the end of this year.
- What is the current bottleneck to increase Robotaxi deployment & personal use unsupervised FSD? The safety/performance of the most recent models or people to monitor robots, robotaxis, in-car, or remotely? Or something else?
- Our Take – The bottleneck seems to be based on data, which Musk said Tesla needs 10 billion miles of data to achieve unsupervised FSD. Once that happens, regulatory issues will be what hold things up from moving forward.
- Regarding Optimus, could you share the current number of units deployed in Tesla factories and actively performing production tasks? What specific roles or operations are they handling, and how has their integration impacted factory efficiency or output?
- Our Take – Optimus is going to have a larger role in factories moving forward, and later this year, they will have larger responsibilities.
- Can you please tie purchased FSD to our owner accounts vs. locked to the car? This will help us enjoy it in any Tesla we drive/buy and reward us for hanging in so long, some of us since 2017.
- Our Take – This is a good one and should get us some additional information on the FSD transfer plans and Subscription-only model that Tesla will adopt soon.
Tesla will have its Earnings Call on Wednesday, January 28.
Elon Musk
Tesla locks in Elon Musk’s top problem solver as it enters its most ambitious era
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla has granted Senior Vice President of Automotive Tom Zhu more than 520,000 stock options, tying a significant portion of his compensation to the company’s long-term performance.
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla secures top talent
According to a Form 4 filing with the U.S. Securities and Exchange Commission, Tom Zhu received 520,021 stock options with an exercise price of $435.80 per share. Since the award will not fully vest until March 5, 2031, Zhu must remain at Tesla for more than five years to realize the award’s full benefit.
Considering that Tesla shares are currently trading at around the $445 to $450 per share level, Zhu will really only see gains in his equity award if Tesla’s stock price sees a notable rise over the years, as noted in a Sina Finance report.
Still, even at today’s prices, Zhu’s stock award is already worth over $230 million. If Tesla reaches the market cap targets set forth in Elon Musk’s 2025 CEO Performance Award, Zhu would become a billionaire from this equity award alone.
Tesla’s problem solver
Zhu joined Tesla in April 2014 and initially led the company’s Supercharger rollout in China. Later that year, he assumed the leadership of Tesla’s China business, where he played a central role in Tesla’s localization efforts, including expanding retail and service networks, and later, overseeing the development of Gigafactory Shanghai.
Zhu’s efforts helped transform China into one of Tesla’s most important markets and production hubs. In 2023, Tesla promoted Zhu to Senior Vice President of Automotive, placing him among the company’s core global executives and expanding his influence beyond China. He has since garnered a reputation as the company’s problem solver, being tapped by Elon Musk to help ramp Giga Texas’s vehicle production.
With this in mind, Tesla’s recent filing seems to suggest that the company is locking in its top talent as it enters its newest, most ambitious era to date. As could be seen in the targets of Elon Musk’s 2025 pay package, Tesla is now aiming to be the world’s largest company by market cap, and it is aiming to achieve production levels that are unheard of. Zhu’s talents would definitely be of use in this stage of the company’s growth.
Tesla analyst Andrew Percoco of Morgan Stanley teased the company’s dominance in its self-driving initiative, stating that its lead over competitors is “not even close.”
Percoco recently overtook coverage of Tesla stock from Adam Jonas, who had covered the company at Morgan Stanley for years. Percoco is handling Tesla now that Jonas is covering embodied AI stocks and no longer automotive.
His first move after grabbing coverage was to adjust the price target from $410 to $425, as well as the rating from ‘Overweight’ to ‘Equal Weight.’
Percoco’s new note regarding Tesla highlights the company’s extensive lead in self-driving and autonomy projects, something that it has plenty of competition in, but has established its prowess over the past few years.
He writes:
“It’s not even close. Tesla continues to lead in autonomous driving, even as Nvidia rolls out new technology aimed at helping other automakers build driverless systems.”
Percoco’s main point regarding Tesla’s advantage is the company’s ability to collect large amounts of training data through its massive fleet, as millions of cars are driving throughout the world and gathering millions of miles of vehicle behavior on the road.
This is the main point that Percoco makes regarding Tesla’s lead in the entire autonomy sector: data is King, and Tesla has the most of it.
One big story that has hit the news over the past week is that of NVIDIA and its own self-driving suite, called Alpamayo. NVIDIA launched this open-source AI program last week, but it differs from Tesla’s in a significant fashion, especially from a hardware perspective, as it plans to use a combination of LiDAR, Radar, and Vision (Cameras) to operate.
Percoco said that NVIDIA’s announcement does not impact Morgan Stanley’s long-term opinions on Tesla and its strength or prowess in self-driving.
NVIDIA CEO Jensen Huang commends Tesla’s Elon Musk for early belief
And, for what it’s worth, NVIDIA CEO Jensen Huang even said some remarkable things about Tesla following the launch of Alpamayo:
“I think the Tesla stack is the most advanced autonomous vehicle stack in the world. I’m fairly certain they were already using end-to-end AI. Whether their AI did reasoning or not is somewhat secondary to that first part.”
Percoco reiterated both the $425 price target and the ‘Equal Weight’ rating on Tesla shares.
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