Tesla Should Sell Its Supercharging Business

Tmd Tesla Superchargers Ts2
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And Elon wept, seeing as he had no more chargers to conquer.

The big news of yesterday, besides the Astros actually winning a game in extra innings, was that Elon Musk unfollowed a bunch of people on X. Just kidding (sort of)! The big news was that Musk fired almost the entire team responsible for running his successful Supercharging business. There are a lot of theories for why he did this, but there’s one I think is kinda fascinating and it makes this move, and a sale of the business, sort of logical.

Less logical and more emotional is Musk’s unfollowing of people, which I do want to talk about a little bit because it fits nicely into a discussion about why talking about Elon Musk is often not fun.

And let’s finish up talking broadly about April’s first sales reports and, oh, the UAW planning to strike against Stellantis. Let the Hump Day Morning Dump begin!

Tesla Fires Supercharging Team And, Fine, It’s A Mediocre Business

Tesla, the EV automaker that creates 10x headlines for every 1x car it builds, is in the news for yet another round of massive layoffs following the company’s relatively poor performance in Q1 of this year.

What’s drawn the most attention is that the layoffs seem to have almost entirely obliterated one team. From the BBC:

Tesla has fired its entire Supercharger division, staff who worked in the team say.

There are over 50,000 Superchargers globally, the company says, making it the world’s largest fast-charging network for electric vehicles.

Boss Elon Musk said the firm would cut one in ten jobs, as it faces strong competition from less expensive rivals.

That seems bad! Here’s some analysis from Tesla-watcher Fred Lambert, who also noted that Tesla is backing out of some leases for new Supercharger sites:

I am extremely perplexed by the move.

If one thing was a clear success at Tesla, it’s the Supercharger network. Even from a talent perspective. No other charging team in the world has been able to do what Tesla did.

Tesla had just won the charging standard battle – making NACS the new standard in North America and all other automakers adopting and jumping onboard with the Supercharger network.

The timing is perplexing from the outside. Tesla has won the charging war and now most major automakers are going to be switching to the Tesla-developed NACS standard. In fact, one would think that Tesla would want to invest more in NACS since more automakers and customers will be using the service.

Here’s an article over at Electrek from late last year about how potentially valuable the Supercharging network might be for the company:

Wedbush Securities analyst Dan Ives, who has been covering Tesla for a long time, came out with a new note to clients today in which he stated that he believes the Supercharger network will represent 3% to 6% of Tesla’s total revenue or $10 to $20 billion in revenue by 2030.

Ives wrote:

With the introduction of Tesla’s Magic Dock, an adapter that will allow non-Tesla EVs to charge on the NACS standard, this provides the company an incremental opportunity to further expand its charging footprint to the entire EV fleet.

That doesn’t seem to be happening here, so what’s going on? The Reuters report on this same news makes a point that’s worth considering:

More traditional automakers might hang on to a business that promised steady revenue and near-continuous data exchanges with customers, analysts said. But Musk could take a Silicon Valley entrepreneur’s view that charging is a legacy business that could be streamlined or even divested.

“My guess is that now that the industry has adopted the NACS standard, he views Supercharging less as a strategic moat and more as a cost center,” said KC Boyce, a vice president at data analytics firm Escalent.

The Tesla Supercharger network could have significant value if Musk wanted to sell it, analysts said. Rival U.S. charging networks have struggled with reliability problems and do not have the scale or prime locations Tesla has locked in.

Here’s my reaction to that underlined parts:

In business, a “moat” works much like an actual moat in medieval times, keeping invaders (competitors) out, and keeping the people (customers) in. When only Teslas had access to the incredible Supercharging network it was one reason why people felt the need to buy a Tesla and it was hard to argue with!

As has been continually reported, one of the reasons why NACS is becoming the standard is that car companies and customers are super disappointed with non-Tesla charging companies like Electrify America.

But once anyone can get into a Tesla Supercharger the moat is gone, and it just becomes another business. And one with a lot more competition. It’s also a tough business, with Volkswagen spending $2 billion and failing so far.

If there was a huge competitive advantage to be had in charging then carmakers would all have their own charging networks; instead, automakers are teaming up to make joint ventures like Ionna (BMW + Mercedes + Honda + Hyundai/Kia/Genesis).

Tesla has a first-mover advantage in terms of Supercharger locations and technology, but the technology part is now partially gone. Given that Elon Musk is shifting the carmaker away from being a carmaker, why not just sell the Supercharger division? It has a lot of value and that money could be put into AI or other endeavors. What does Musk himself have to say?

That’s not the usual enthusiasm Musk tends to have for his next big idea.

Musk Unfollowers Some Of His Biggest Fans

Muskdefending

I don’t know who originally created the meme, based on The Simpsons, but it’s always true. It’s so hard to talk about Elon Musk and we, as a site, even have a whole section in our style guide about the topic because we don’t want to be knee-jerk, reflexively critical of Musk just because some of us might disagree with his personal beliefs.

The Lisan al Gaib Musk ain’t, but the fervor around Musk is real, and it doesn’t help that Musk also owns the social platform most associated with people exhibiting cult-like behavior.  Apostasy is soon to follow!

For instance:

This is interesting. Sawyer tweets about everything Tesla-related and does so with a very pro-Tesla perspective. While I don’t always agree with Sawyer’s reflexively pro-Tesla view, he’s a good follow because he’s just relentless and notices everything [Ed Note: Agreed; Sawyer Merritt is on the ball. -DT]. Omar, aka Whole Mars Catalog, is a little more out there in his support of Tesla.

So why the unfollow? Sawyer explains:

Musk didn’t say what happened, but unfollowing huge fans for sharing information you don’t want shared seems within Musk’s usual range of behaviors.

I don’t think that Sawyer will take the same heel-turn that long-time Tesla stan Fred Lambert has (he’s lately been more critical of Musk than he was before), especially because…

… he’s still going to be voting to make Elon Musk basically the highest-paid employee of any company at any time in human history.

Hyundai And Kia Have A Down April

2023 Ev6
Photo: KIA

Kia has seen a few months of sales downturns and now Hyundai is joining, though it’s a pretty small number. Year-over-year Hyundai sales dropped 3% in April and Kia was down about 3.6%. What’s going on?

First, as I’ve noted before, when the numbers get down to a couple of percentage points, there’s some seasonality to consider. April has one fewer selling day this year than it did last year, so the overall market is expected to decrease about 2% year-over-year.

That’s still not great, but at least Kia and Hyundai are both seeing EV sales jump. Kia hit a record with 3,623 EVs sold, which includes more than 2,000 of the EV6. At the same time, Hyundai saw EV sales up 26%.

The biggest drop in the group was Genesis, which lost 5.9%

UAW Warning Of Strike At Stellantis Warren Plant

Warren Stellantis Factory Plant
Source: Stellantis

When I said I was worried about Stellantis sticking the landing yesterday, I meant it. The company is making a big jump and all the little things can add up quickly

To wit, The Detroit News has a story today on a potential strike at the Stellantis plant in Warren, Michigan, which makes parts for numerous vehicles in the company. The issue? Safety.

“When it rains, the facility floods because the ceiling is leaking. We have to fight for every single pair of work gloves, while we handle metal and materials to build world class vehicles for Stellantis,” Local 869 president Romaine McKinney III said in a statement. “The list goes on, and we’re putting an end to it. Our union grievance procedure gives us the power to stand up for safety on the job, and we intend to take action if necessary.”

That’s not great. Here’s the response:

“Stellantis is committed to providing a safe and healthy work environment for all employees,” the company said in a statement sent by spokesperson Jodi Tinson. “The company is in discussions with UAW Local 869 to assess open health and safety grievances at the Warren (Michigan) Stamping Plant and aims to resolve this matter without a work stoppage.”

When it rains it pours… and also the plant’s ceiling allegedly leaks.

What I’m Listening To While Writing TMD

The first Gorillaz album is so good. All the songs are great. This album came out the year I went to college and it blew my mind. Plus, who doesn’t love Del The Funky Homosapien as a ghost who can rap?

The Big Question

Who should buy the Supercharger network?

Top graphic images: Tada Images and Doomu, via Stock.Adobe.com

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145 thoughts on “Tesla Should Sell Its Supercharging Business”

  1. Best theory I’ve got is that it’s part of a ploy to push the board into approving his compensation package. He’s going all-in on autonomous driving and robotaxis still, and that means AI. And if they don’t give him what he wants, he won’t use his AI company to help Tesla. Yes, it still looks nuts from the outside/sane PoV, but to a board that’s not exactly independent and is already buying what he’s selling, it could work.

  2. I worked at Warren Truck Assembly for a couple of years (Warren Stamping is connected by a tunnel for forklifts to move stamped parts into the Body Shop).

    I can confirm there were always leaks even in the assembly shop when it rained. It’s one of the oldest auto plants and has been in continuous use since before WWII. So, you would expect things like this to happen.

    With that said, however, with Stellantis making record profits in the last few years and the giant profit-sharing bonuses workers have received, you would think they could invest a relatively paltry sum into the roof.

  3. Their charging network is their most valuable piece to me. If someone were able to buy that out and continue expanding while keeping charging easy to use, then they’d be the big winners in the electric transition. Bonus, people wouldn’t have to care about Musk anymore. But I doubt he’ll just let it go without doing some damage first.

  6. Gorillaz is one of my top 5 all time albums. Not only is it great on its own, it also had a profound influence on my musical taste, showing my midwestern, rock loving teenage self that hip-hop is awesome, and introducing me to Trip Hop, leading to a life long love of Portishead and Massive Attack. Demon Days is a better album, but Gorillaz has a special place in my heart!

  8. Now that there’s demand beyond their brand and a solid infrastructure laid out, if Tesla were run by anyone other than Elon, the right play would be to sell the vehicle manufacturing and make the money on charging.

    Wouldn’t surprise me if an oil company or major electricity provider would want to pick up the charging arm and pretty much own the charging market.

    1. the right play would be to sell the vehicle manufacturing and make the money on charging.

      This what Uninformed me has assumed would happen. I figured Tesla the car company would sell out to a legacy manufacturer at some point.

  12. Musk is so wrapped up in his right wing bubble that he is absolutely convinced that Trump is guaranteed to win the election and take away government support for charging network expansion and low cost EVs.

    1. you don’t have to be in a right wing bubble to be convinced that Trump is guaranteed to win the election; one look at how the Dems are shooting each other in the foot re: Gaza and you’d be convinced.

      Alternatively: now that he’s got every other automaker on board re: NACS he is threatening to take his ball and go home *unless* he gets massive subsidies from the Feds to keep critical infrastructure on.

  13. Why would anyone buy the Supercharger network when they can just hire all those folks that got the boot? Even if they paid them more than market rate in order to stave off the competition it would be orders of magnitude lower than buying the company.

    And since so many are already licensing the tech from Tesla, is there really any incentive other than just owning the existing real estate?

    Full disclosure: I know almost nothing about how business operates but I’m genuinely curious about how this all plays out.

    1. Real estate and existing infrastructure is a pretty good incentive! It’s a TON of stuff you don’t have to build on your own. Hire the people who were fired too and you have a turnkey business.

  14. There’s a fundamental problem when one man’s short attention span can have such massive consequences for millions of people.

  15. If Ionna wanted clout overnight, they should buy the Supercharger network. IMO I thought what Tesla had going for it long term was that network. They could sell off or wind down the car business and just focus on being a charging company. That would have basically killed Chargepoint, and Electrify America off pretty quick.

  17. Back when the move to NACS was announced I asked whether the end result would be everyone getting access to Tesla-quality charging or the Tesla network devolving into something more like Electrify America. This is the first strong clue that it will be the latter.

    Not a huge surprise though. As Matt points out, if everyone can use it then it’s no longer a differentiator so there’s less motivation to invest in it. Still too bad since the charging network was the one killer feature that would have made me consider a Tesla.

    Reading about some of the other crazy layoffs in the comments I am starting to smell a huge lawsuit too. Tesla’s valuation has alway been predicated on the idea that they were going to expand beyond cars, and now instead it seems like they’re pulling back from everything except FSD? I increasingly think this will end in tears sooner than I expected.

    If Musk manages to drive both Twitter and Tesla into the crapper after they were doing so well it might be the most self-destructive business move ever.

    1. Elon likes to break things in order to fix things.

      This fits the Narcissists need to be perceived as the only one who can make things better. Everyone else is expendable. He’s a hero in his own mind.

      1. Since I get a lot of space news, I can say that one thing he doesn’t like to break are his boosters. If I’m not mistaken, they just did their 30th flight to the ISS with the same booster system. Impressive stuff.

        1. I’m more impressed with SpaceX’s COO, she’s the one doing the heavy lifting (and the amazing engineers obv).

          The way I see it, Elon’s main contribution was ‘It’s okay if it blows up a few times’. Which isn’t to be understated, that was radical and the results are proof of how much better that approach was than the legacy competition.

  18. It was the supercharging, public policy, and new product development teams that were laid off. Musk is currently undergoing some sort of mania, because these are not reasonable business decisions. Drew Baglino, one of the oldest employees at Tesla, having been part of the roadster design team, left and sold all a ton of shares a few weeks ago. If he’s finally rinsed his hands of things, that’s not a good sign. Musk is on the warpath getting rid of people who don’t pass the “trustworthiness test” among other things. Tesla is cooked. :c

    Source for layoffs: https://arstechnica.com/cars/2024/04/tesla-to-lay-off-everyone-working-on-superchargers-new-vehicles/

  19. Business 101:
    When preparing a business for sale – you make push for greater short-term revenue while reducing overhead costs (ie: headcount, expansion & short-term maintenance) to make the numbers look better than they would in the normal, long-term operation of that business.

    What you do not do is reduce the headcount to the point where you lose key talent and gut business operations such that it reduces the potential for continued business income streams. In fact, you reward key talent by offering bonuses for them to stay through the short-term turbulence.

    When you have a Silver-Spoon Narcissist as a CEO – he only sees himself as key talent.
    Everyone else is expendible.

    The Narcissist is the last person you want to work for – and the last person you want to buy a business from.

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