Elon Musk bows out of politics to try to rescue Tesla

He also said Tesla’s sales had turned around after a disastrous first quarter.

In the three months to the end of March, Tesla reported a 13 per cent fall in deliveries of its vehicles, a 20 per cent drop in revenue from auto sales, and a 71 per cent fall in net income.

Musk’s close relationship with Trump, his controversial role in the administration and his support for far right political groups in Europe have seen a collapse in Tesla’s sales in Europe and elsewhere.

In the March quarter they were down 62 per cent in Germany, for instance, and by a similar amount in Europe. In China, they fell 20 per cent and in its key American market, California, its market share in EVs slumped from 56 per cent to per cent.

Tesla dealerships have attracted protests, Teslas have been set on fire and Tesla owners have taken to using anti-Musk bumper stickers to distance themselves from his political activities.

Musk said sales were “doing well” and that “it’s already turning around” amid a major rebound in demand and that he didn’t anticipate any major shortfall in sales this year, although he conceded that Europe remained the company’s weakest region.

He pushed back at suggestions that he has damaged the Tesla brand, arguing that while it might be losing sales on the political left it has gained them on the right. The numbers say that he has lost a lot more than he has gained.

Tesla needs more of his attention. Separate to the impact on its brand of Musk’s political activities is the fact that, while its Chinese competitors are churning out new models almost, it seems, on a daily basis, Tesla’s only new vehicle in the past five years has been the Cybertruck, which has been less than successful.

Tesla has an unsold inventory of about 10,000 of those controversial vehicles, worth about $US800 million. One-year-old Cybertrucks with less than 10,000 kilometres on their odometers have seen their value crash 35 per cent.

Musk is betting Tesla’s future on autonomous vehicles and robotics, with a handful of his robotaxis scheduled to operating in Austin, Texas, by the end of June. He says there will probably be a thousand of the self-driving EVs on US roads within a few months and hundreds of thousands by the end of next year.

Musk has, however, been making a similar prediction for the best part of a decade, conceding last year that he has been “overly optimistic” in the past.

Tesla’s $US1.1 trillion market value is dependent on Musk realising his vision for robotaxis and robotics. It would be worth a fraction of that amount if that vision isn’t realised.

Musk must ask himself on occasion whether the $US250 million-plus that he spent helping to get Trump re-elected and his role in DOGE has been worth it, given the damage done to Tesla.

He has made no secret of his opposition to Trump’s trade wars, which will also harm the company. Tesla imports batteries from China and other components from Mexico.

DOGE has also been far less successful than he promised.

At the outset, Musk claimed he could cut $US2 trillion from government spending. He later reduced the target to $US1 trillion. Now, it seems, $US160 billion is about as much as can be achieved.

DOGE claims to have reduced spending by $US170 billion, but numerous analyses of the list of cuts it posts on its website have demonstrated that the list is riddled with errors. It claims credit for contracts that had already expired or had been cancelled before DOGE was created. There’s double-counting, the confusing of one-off savings or cash inflows from asset sales with recurrent savings.

The “savings” so far represent about 0.2 per cent of last year’s US government spending. They are immaterial.

DOGE has, however, created chaos within the federal bureaucracy with its mass sackings and subsequent reinstatements. It has spawned dozens of legal challenges and created tension within Trump’s cabinet, where the cabinet secretaries resent the Musk team’s intrusions into their portfolios.

Musk must ask himself on occasion whether the $US250 million-plus that he spent helping to get Trump re-elected and his role in DOGE has been worth it, given the damage done to Tesla.

Whether it has been effective at all won’t be known for some time, when the longer-term effects of the loss of expertise and capabilities become clearer.

DOGE has, for instance, sacked thousands of Internal revenue Service employees – more than 10 per cent of its employees so far, with plans to cut numbers by 40 per cent this year. The cuts include nearly a third of the IRS tax auditors.

The Yale Budget Lab has estimated that the cuts could cost the US $US323 billion of revenue over the next decade. It is estimated that every $US1 spent on auditing the top 0.1 per cent of earners generates a return of about $US26 of increased revenue.

The disregard for the longer-term effects of the assault on the IRS fits with the way DOGE has operated. It has created havoc within key government agencies without regard for the consequences and often, it seems, with little understand of how the agencies operate or of the work they do. (DOGE sacked staff at the Energy Department, including 500 at the National Nuclear Security Administration, without realising they were responsible for the safety and security of America’s nuclear weapons and then had to scramble to try to rehire them).

While the way DOGE has operated fits with the Silicon Valley mantra of “move fast and break things,” there’s no sense that DOGE is working to any plan other than to slash and burn, indiscriminately, whatever it can.

The DOGE team is now embedded within US agencies so, regardless of whether Musk retains some role, it will continue to create chaos and dysfunction for little meaningful return.