Elon Musk just set Wall Street up for one of his classic head fakes

Tesla is on the brink again. Sales are slowing even after the company slashed prices. The company is laying off 10% of its workforce — 14,000 workers from Shanghai to San Jose, from the factory floor to the executive suite. The company had to recall every single Cybertruck it shipped. And Tesla's position in China, a country that has become critical to its future, is getting shakier.

There's only one person to blame for the company's shambolic state and only one person whose exit could save Tesla: Elon Musk. For the past few years, Tesla has looked unstoppable, but during those high times, Musk failed to implement any strategy that would insulate the company from what has become a violent global electric-vehicle price war. The company is incinerating cash, losing market share, and holding more aging inventory than ever before.

Tesla reported its first-quarter earnings on Tuesday and missed expectations across the board, even though Wall Street was already expecting the worst. Earnings per share came in at $0.45, lower than analysts' expectations of $0.52. Free cash flow fell a stunning 674% as Tesla focused on AI research and making capital improvements. Gross profit fell 18% from the same time a year ago, and gross margins fell from 19.3% to 17.4% over the same period. If Tesla the company were a car, this is when you start to hear it make a rattling sound.

The company's problem isn't a matter of getting through "production hell" or "delivery hell" on a new model, which Tesla has been able to survive. Hell is, at the very least, a location. Tesla's problem is that it has no clear direction. It doesn't matter how much cash a company has on hand if it's blowing it on products that aren't ready to scale — like a robotaxi. Or cars that no one wants — like its dated models.

Musk seems to understand at least that much: For years, Tesla has teased the development of the Model 2 — a $25,000 Tesla for the everyman. This is the car the market wants, and a Reuters report from earlier this month that the Model 2 was being scrapped (which Musk denied) sent the stock into a tailspin. Given this clear signal from investors, the company pivoted and announced in its earnings release that it planned to speed up production of "new and more affordable products" to early 2025. Wall Street ate this up: in spite of the miserable results, Tesla's stock has gained nearly 20% since the earnings announcement and analysts were falling over themselves to praise the news. It's like people have never seen this play from Musk before, but anyone who's been following Tesla knows we have.

Musk is notorious for delivering so late that any sort of timelines are to be taken with a grain of salt. Even Musk's most loyal shareholders — like Ross Gerber of investment firm Gerber Kawasaki — were dubious. In an interview with Bloomberg on Tuesday after Tesla's report, Gerber said that he "can't rely" on what the company says about timelines anymore. In the company's post-earnings conference call, Musk only mentioned vague plans for speeding up the production process and spent more time talking about his far-off vision for an Uber-like robotaxi fleet.

"I'd say at least eight to nine years before they get a robotaxi working," Tu Le, the founder of the electric-vehicle consultancy Sino Auto Insights, told me in a recent interview. "I think they'd argue that they already made it. But I'm thinking about the best-case scenario. And I'm being very optimistic.

Being late wasn't a problem when Tesla was the only company making good EVs, but that's not the case anymore. Musk does not have eight or nine years to save Tesla, and making vague promises to deliver a new car that the market actually wants — while appealing to Wall Street — does not relieve the pressures the company is facing now. On one side of the world, competitors in China can make cars at a much lower cost. On the other side, legacy automakers are leaning on their combustion-engine and hybrid car sales to make it through the slowdown in demand for electric cars. If the Chinese market is a rock, then Western markets are a hard place. Tesla is caught in between. The company needs a serious leader with practical ideas — no self-driving gimmicks, no blowtorches, no broken Cybertrucks, no shitposting, no video-game marathons, and no casual ketamine use. Basically, no Elon. It needs a singularly focused, ruthlessly productive leader who can deliver the Model 2 — without copious delays.

On Tuesday, Musk addressed the recent round of layoffs by saying that Tesla needed to restructure itself for a "new phase of growth." He's right about that, the carmaker does need a major shake-up — starting with him.

The future did not have to look this ugly for Tesla. In 2020, the company was on top of the world. Its Shanghai plant started cranking out lower-cost, higher-margin cars. It was building a plant in Germany and another one in Texas. It sold more cars than ever before. Consistent annual profits led to a glorious stock market rally, and Wall Street rejoiced.

What did Musk do with those glory days? He sold a bunch of his Tesla stock to buy Twitter, tried to get out of the deal, and then was forced to go through with it. He blew up some rockets (to be fair, some also made it to space). He implanted a brain chip into a bunch of monkeys. He brought a kitchen sink to work and added a few more CEO jobs to his plate. He publicly bungled Gov. Ron DeSantis' attempt to launch a presidential campaign. At Tesla, Musk delivered about 4,000 Cybertrucks — every one of which has been recalled for faulty acceleration — while frittering away any goodwill the company has with its core customers.