- Elon Musk flew 150,000 miles in 2018 on a $US70 million private jet.
- SpaceX reportedly billed Tesla $US700,000 for Musk’s use of the aircraft.
- Neither SpaceX nor Tesla has expressed any reservations about Musk’s travel.
- Musk can fly his plane anywhere he wants, and the returns for his efforts have been considerable.
In the days leading up to Tesla fourth-quarter earnings report, an unexpected controversy broke out for a company that’s no stranger to monthly and even weekly crisis management.
SpaceX has provided Tesla and SpaceX CEO Elon Musk with a 2015 $US70 million Gulfstream G650ER business jet – an exceptionally nice aircraft – and Musk clocked 150,000 miles flight time on it in 2018, according to The Washington Post.
Much of that travel was in a tight West Coast triangle, with hops from the San Francisco Bay Area, where Tesla has its headquarters in Silicon Valley and a factory in nearby Fremont, to Los Angeles, which is home to SpaceX and Musk’s mansions. And he flew from the San Francisco Bay Area to the Reno, Nevada, region, where Tesla operates its Gigafactory battery facility.
But the “ER” in the Gulfstream’s name stands for “extended range,” so there were trips to Asia and Europe.
Tesla’s revenue has hit a critical milestone
The Post offered this contrast: “The billionaire executive’s frequent travel on a private plane was largely paid for by Tesla, the cash-burning automaker that faces billions of dollars in debt and has laid off thousands of employees within the last year, including slashing 7 per cent of its workforce this month.”
Just quickly, and in order:
- Every carmaker faces billions of dollars in debt. The business runs on debt and lots of it. It’s usually not an issue as long as the carmaker keeps selling cars.
- Tesla has burned a lot of cash, but carmakers … burn a lot of cash. Again, it’s a simple fact of the industry that becomes a problem only if the cars stop selling. You have the option to not spend the money, but then you won’t build any cars, you won’t have anything to sell, and you won’t have any more cash to not spend.
- Tesla did indeed lay off thousands of workers, but for several years it’s been obviously that Tesla’s head count is out-of-whack for a relatively small automaker.
Air Elon is how Musk manages his companies firsthand
One could point out that other carmakers in previous eras have faced billions in debt, burned cash, and executed layoffs while operating small air forces of business jets.
But it isn’t necessary to point that out because the bottom line is that Elon Musk is the CEO of Tesla and SpaceX and can fly his plane anywhere he wants. If Tesla investors are offended, they can sell their shares. If the board is unhappy, it can fire Musk. If SpaceX has a problem with this, it can tell Musk to ask the US government to fly him around.
The carbon-footprint aspect of Musk’s travel, incinerating thousands of pounds of jet fuel in 2018, looks sort of hypocritical given his insistence that Tesla’s mission is to end the fossil-fuel age. But Tesla, under Musk, also sold nearly 250,000 vehicles in 2018 that have zero tailpipe emissions, so the Elon-is-a-phony-environmentalist argument rapidly collapses under the substantial weight of Tesla’s ongoing carbon offsetting (or more accurately, carbon elimination). He didn’t even have to take time out in 2018 to plant a tree.
It’s also worth noting that Musk is a rather extreme example of an executive who practices the Toyota-derived management philosophy of “seeing for yourself.” He puts himself on the front lines at his factories while also serving as Tesla’s worldwide chief salesman and SpaceX’s go-to-Mars-or-bust advocate. That’s not something you can easily accomplish with Google Hangouts.
However, let’s grant Musk’s critics that his jet use is completely offensive and a shining example of his complete celebrity out-of-touchness and arrogance.
What are we getting in return?
$US700,000 per year could translate into $US100 billion in market caps between Tesla and SpaceX
Investors who bought into Tesla early, after its 2010 initial public offering (IPO), are sitting on a 1,000% return. The jet thing isn’t going to bother them. Musk could sell his Gulfstream and buy a Boeing and plate the bathrooms in gold and it would all be A-OK.
The auto industry has a risk-craving company that’s willing to bet the farm every year on a technology – electric cars – that’s been a dud since the 1900s. That risk-craving has validated at least a market for luxury electric vehicles, marking the beginning of the end for the internal-combustion engine. (The internal-combustion engine, by the way, had a nice run – more than a century is nothing to scoff at.)
General Dynamics, which owns Gulfstream and is an American company, gets some good branding for its business and its nearly 100,000 employees.
NASA gets a homegrown launch system and the ability to off-load a degree of taxpayer risk to SpaceX’s investors.
According to The Post, SpaceX billed Tesla $US700,000 for Musk’s use of the plane. I assume that wasn’t the whole bill, so let’s round it up to $US1 million. Combined, Tesla and SpaceX – which hasn’t staged an IPO but could be valued at about $US50 billion – could be worth 100,000 times that.
Seems like the jet was an acceptable expense.
But, let’s say it wasn’t. I don’t think Musk is quite ready to ride a SpaceX rocket around the world. But he’s aware of the private-jet carbon problem. When he got mad about traffic in Los Angeles, he created an entire tunnelling company. And he hasn’t even had to get mad to start thinking about electric aircraft.
I’d be willing to bet that Elon quite literally starts flying on his own plane in the next decades – that is, one designed and built by SpaceX or Tesla and runs on electrons. That’s unless he decides to run Tesla and SpaceX from Mars.
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