Can Elon Musk Turn Tesla Around?
Case Code: BSTR594
Case Length: 18 Pages
Pub Date: 2020
Teaching Note: Available
Organization: Tesla, Inc.
Industry: Electric Vehicles
Themes: Strategic Management, Leadership and Change Management, Turnaround, Organizational Crisis
Abstract Case Intro 1 Case Intro 2 Excerpts
The case discusses the crisis faced by Tesla, Inc (Tesla), the world’s biggest electric vehicle (EV) maker. In April 2018, Tesla, founded by Elon Musk (Musk), began to show signs of a downward turn. Musk had failed to deliver on his target production of the Model 3 and was spending cash rapidly, investing in ambitious expansion plans. Analysts even predicted bankruptcy for Tesla by the end of 2018. Apart from this, Musk raged at the media, insulted financial analysts during earnings calls, and posted negative tweets on social media – all of which called into question his credibility as the CEO of Tesla.
Though Tesla hit the desired production rate of Model 3 sedans and closed 2018 with two profitable quarters, it was unable to maintain its momentum. The gradual phase-out of the federal EV credit, high executive turnover, and the company’s inability to curb production costs while continuing to boost output led to two successive quarters of losses in 2019. In May 2019, Tesla’s stock plunged by a staggering 27% amid investor concerns. Under pressure to deliver profits, Musk was trying to contain costs while still spending on major initiatives that ranged from a Shanghai factory and assembly-line to upcoming models such as the Model Y and a semi commercial truck. Going forward, Musk faced a number of challenges including a declining demand for EVs, liquidity concerns, high turnover, and growing competition. As Tesla was at a critical stage of business, analysts wondered whether Musk could resolve Tesla’s operational and financial issues and bring the company back on track. Could he revive the fortunes of Tesla? If so, how?
The case is structured to achieve the following teaching objectives:
- Understand the causes of the organizational crisis at Tesla
- Study the leadership qualities and management skills of Musk
- Understand the impact of Musk's leadership on Tesla
- Understand the scope for a required strategic change in an organization
- Understand the issues and challenges in turning a company around
Tesla in Trouble
A Rocky 2019
Can Tesla Bounce Back?
Turnaround strategy, Turnaround management, Organizational Crisis, Strategic Change, Change Management, Leadership, Strategic Management, Situational Analysis, TOWS matrix, Leadership traits, Transformational Leadership, Micro manager, Narcissist, Retrenchment
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