Yahoo Autos Another Tesla Shareholder Just Sued Elon Musk Over ‘Unlawful Profits’
Good morning! It’s Wednesday, June 12, 2024, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. Here are the important stories you need to know.
1st Gear: Elon Musk Sued Over Billions In ‘Unlawful Profits’
Another day, another story about Elon Musk and his antics at Tesla. Today, instead of being about his enormous pay package and the uphill battle he is facing to secure $56 billion in compensation, it’s about yet another legal battle he’s due to face. Musk is now facing a legal challenge in Delaware from a Tesla shareholder who argues that he should return billions of dollars in alleged “unlawful profits” that he pocketed after selling shares in the American electric vehicle maker.
A case has been filed in Delaware arguing that Musk should repay the profit he made after offloading billions of dollars worth of Tesla stock, reports Reuters. The lawsuit, which was filed by the Employees’ Retirement System of Rhode Island alleges that Musk sold the stock at an inflated price before news of dwindling Tesla deliveries was made public, as Reuters reports:
Elon Musk made billions of dollars by selling Tesla stock using insider information, an institutional shareholder accused in a lawsuit filed on Tuesday, asking the court to direct the Tesla CEO to return “unlawful profits.”
Musk and his brother, Kimbal Musk, a Tesla director, sold a combined $30 billion in the electric vehicle maker’s stock between late 2021 and the end of 2022, cashing in before news that would cause the stock to fall became public, according to the lawsuit, which was filed by the Employees’ Retirement System of Rhode Island (ERSRI).
Musk sold the shares at artificially inflated prices by concealing his plan to use the proceeds to buy social media platform Twitter, which he later renamed X, according to the lawsuit, filed at the Delaware Chancery Court. Musk also sold Tesla stock when he knew that deliveries of Tesla cars had fallen far below public projections, the lawsuit said.
The lawsuit is the second challenge from a Tesla shareholder that Musk is facing in Delaware court and follows a similar case that accuses Musk of insider trading at Tesla. Musk is also facing a probe that is set to determine if he may have broken federal securities laws in 2022 when he bought stock in Twitter.
2nd Gear: GM Slashes EV Targets As Demand Slows
Tesla isn’t the only electric vehicle maker facing drama in America, as other automakers across the sector come to terms with slower sales and middling demand for battery-powered cars. The drop in interest in EVs has so far seen automakers slash prices, cut sales targets and now General Motors has dropped its production targets for its electric models.
General Motors had initially planned to build between 200,000 and 300,000 electric cars this year, reports the Detroit Free Press. However, that target for 2024 has now dropped to 200,000 to 250,000 EVs, as the site reports:
[GM CFO Paul] Jacobson said GM still believes it can be “variable profit positive” on its EVs at the “low 200,000" production range. GM promised investors earlier this year that it would show variable profit in EVs by the second half of the year. Variable profit is when the revenue GM earns from selling the vehicle exceeds the direct cost of producing it. The calculation excludes corporate or “fixed” costs, measuring only the costs that go into the car and the revenue earned from the car directly.
“We think we can still do that in, probably Q4 more than the second half,” Jacobson said of achieving variable profit positive. “But we still think that’s an achievable goal going forward.”
The dip in EV production for GM comes hot on the heels of its announcement that it would soon be returning attention to the hybrid segment after Toyota demonstrated that Americans don’t want EVs, they want hybrids instead. The American automaker announced last month that it was plowing millions into a fleet of new hybrid models, with the first set to arrive in 2027.
3rd Gear: Europe To Slap Massive Tariffs On Chinese EVs
Depending on where you get your news, cheap Chinese EVs are either our savior and they’ll help dramatically cut emissions from transport, or they’re the devil in disguise and they’re here to take all your personal information and ruin America. Whichever side of the fence you fall on, it’s easy to see how their cheap prices make it hard for legacy automakers to compete. But now, that budget friendly appeal is facing challenges from both sides of the Atlantic as the tariffs begin piling on.
After the Biden administration slapped a 100 percent tariff on Chinese EVs imported into America, Europe is now set to follow suit with its own levy of up to 25 percent on battery-powered cars imported into the trading bloc, reports the BBC. As the site explains:
It is widely expected that the Commission will provisionally raise duties on EVs imported from China, from the standard level of 10% for third country imports to between 20 and 25%.
According to Matthias Schmidt of Schmidt Automotive Research, this would be a rather more proportionate response than the US move.
“The 100% tariff is just pure protectionism, regressive and stifles innovation, and prevents a competitive landscape for the consumer,” he says.
“If the EU imposes tariffs of no more than 25%, it will be more about leveling the playing field, and evening out the 30% cost advantage Chinese manufacturers have.”
However, it’s unlikely that a tariff of this amount will do much to hinder China’s dominance of the electric vehicle market around the world. The tariff will cause a bump in purchase price for Chinese EVs sold in Europe, but as it’s estimated that many already carry a 30 percent saving over European rivals, the fit, finish and savings posed by a Chinese car could be enough to continue swaying buyers that way.
4th Gear: Boeing Deliveries Drop By Half This Year
If you were in the market for a multi-million dollar aircraft, what would you think to the onslaught of bad press surrounding Boeing these days? Would stories of parts falling off, engines failing and even suspicious deaths of whistleblowers make you rush out and buy its planes? Well, it turns out those stories haven’t been good for business, as deliveries at Boeing are dramatically down over the same period last year.
American plane maker Boeing saw its deliveries drop by half in May 2024 compared with the same period last year, reports Reuters. The drop in sales was attributed to production slowdowns as a result of an ongoing probe into quality control at the aviation giant. As Reuters reports:
Boeing said on Tuesday it delivered 24 commercial planes in May, about half of the 50 jets it handed over to customers during the same month a year earlier, as it continued operating a slower assembly line to complete outstanding work.
Boeing has said it is producing fewer MAX single-aisle jets to improve manufacturing quality, after the Jan. 5 mid-air blowout of a door plug on a 737 MAX 9 jet brought the U.S. planemaker under increased scrutiny from regulators.
The planemaker said it delivered 19 MAX jets in May, three more than in April, but down 45% from the 35 jets it handed over to customers during the same month in 2023.
Boeing deliveries have been well down since a probe into the planemaker was launched earlier this year to investigate the shortcomings that led to a door plug flying out of an aircraft mid-flight. The probe brought production to a near standstill in March, when Boeing had single-digit deliveries. The company is also working under a 38-jets-a-month cap imposed by federal investigators probing Boeing.
