There’s never been a more challenging time to be Elon Musk

Elon Musk. Photo: Scott Olson/ Getty Images.

Elon Musk is far more than a technology or business superstar. His fame is far-reaching and his fortune is vast, and his companies are captivating in ways that Apple, Microsoft, Amazon, Uber, Google, and Facebook aren’t.

Musk has world-changing ambitions and an image that inspired the Tony Stark character from “Iron Man.”

Which makes sense: Musk might not be an actual superhero, but he does his best to play one in real life. Tesla isn’t just the most successful electric-car company in history — it’s the only new automaker to be established in the US since Chrysler in 1925. And SpaceX doesn’t just want to send rockets into orbit — it wants to send astronauts to Mars.

In the case of Tesla, the markets have rewarded Musk’s appetite for risk with a $30-billion market cap. The CEO could, if he were so inclined, sit back and congratulate himself for helming a company that was selling no cars just over a decade ago, but that’s now aiming to sell 80,000 to 90,000 in 2016 and that has provided early stock owners with a 1,000% return since the 2010 IPO.

But that isn’t Musk’s style. And while it’s been good to be Elon for the past ten years, he’s now up against the biggest leadership challenges of his career as he tries to push Tesla beyond being simply an electric-car company, toward being a full-on provider of sustainable-energy-and-transportation solutions.

Steep learning curve

The biggest problem with that objective, of course, is that Tesla is still learning how to be a world-class car maker. The bottom line is that it makes pretty great cars that hundred of thousands of potential customers are willing to wait years to acquire, in the case of the $35,000 mass-market Model 3, arriving in 2017, but it also struggles to make enough of them, on time.

The Model S sedan has been in production for several years and is in enough demand that it should be helping Tesla meet its annual delivery targets. But Tesla has, for two years now, fallen short on the upper end of its delivery guidance. The Model X SUV launched years behind schedule and was beset with design and engineering complexities that have limited production — and the ability of the Model X to contribute to Tesla’s vast cash needs.

Tesla Model 3
The Model 3 unveiling. YouTube/Tesla

The Model 3 is critical to Musk’s goal of selling 500,000 vehicles annually by 2018, but production on that scale has forced Musk to rethink the whole process of industrial assembly, going so far as to propose that Tesla will introduce the most significant advancement in manufacturing since Henry Ford opened his legendary River Rouge plant in 1928 and Toyota developed is much-imitated Toyota Production System after World War II.

Elon’s agony

“We were in production hell,” Musk told analysts after the company reported second-quarter earnings in early August. He was referring to the extreme difficulties that Tesla had faced at its factory in Northern California through the first half of the year. It got so bad that Musk said he kept a sleeping bag in his office so that he could sleep near the assembly line. He said that this experience led to “a whole lot of mental scar tissue.”

That doesn’t sound very much like the life of a high-tech rock star, a man who has been compared to everyone from Steve Jobs to Thomas Edison to Howard Hughes to Walt Disney.

Elon musk iron man
Can Iron Man make it? Flickr/jurvetson

But this is Musk’s new normal. Wall Street has been turning more bearish on Tesla, at least in the short term. Reliable Tesla bulls have trimmed their expectations. The consensus is that Tesla is headed into a rough patch — and Musk’s move to acquire struggling Solar City, founded by his cousins, and integrate it with Tesla energy business isn’t helping matters. The deal will add billions in debt to Tesla’s balance sheet and stretch Musk even thinner as a leader. Obviously, having a SpaceX rocket explode on the launch pad, with a Facebook satellite on board, isn’t helping matters.

The Tesla pattern

Musk may believe that the worst is over for Tesla, at least in terms of its production woes from earlier in the year, but if history provides any lessons, things are about to get a lot more difficult on the financial front.

Tesla Chart
Tesla stock suffers at the end of the year. Screenshot via Google Finance

Tesla lacks a major news event or product announcement to carry it through the fall. In 2014, it rolled out the all-wheel-drive version of the Model S, and last year in launched the Model X. This year, nothing has yet been announced. The last big story to come from Tesla was the opening of the massive Gigafactory battery factory in Nevada. Otherwise, the company has been dealing with investigations and the fallout from a fatal crash of a Model S in Florida in May, while the vehicle was using the Autopilot semi-self-driving technology.

At the end of the year, Tesla tends to endure a stock slide that lasts through the first quarter of the following year. And that slide may have started earlier this year, as shares are well off their 2016 highs, trading last week below $200.

There’s not much point in underestimating Musk. He’s seen Tesla past the verge of bankruptcy (in 2008) and has put more electric vehicles on the road than anyone thought possible back in 2010. His contributions to society have thus far been heroic. But he’s going to have to call on all his reserves of innovation and inspiration to ride out the next six months.

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