# Is Elon Musk's Business Empire Collapsing?

An episode of [Patrick Boyle On Finance](https://invisiblenetwork.ai/podcast/1547740313), 30 Mar 2025, 21 min.

Audio: https://traffic.megaphone.fm/APO4188102526.mp3

Elon Musk once described competition for his businesses as non-existent, but today the two businesses that underpin his corporate empire - Tesla and SpaceX, are facing more and more competition. In todays video we examine if Elon Musk's business empire is collapsing? Patrick's Books: Statistics For The Trading Floor: https://amzn.to/3eerLA0 Derivatives For The Trading Floor: https://amzn.to/3cjsyPFCorporate Finance: https://amzn.to/3fn3rvC Ways To Support The Channel: Patreon: https://www.patreon.com/PatrickBoyleOnFinance Buy Me a Coffee: https://www.buymeacoffee.com/patrickboyle Visit our website: https://www.onfinance.org Follow Patrick on Twitter Here: https://bsky.app/profile/pboyle.bsky.social Business Inquiries ➡️ sponsors@onfinance.org

## Transcript

[0:00] Mahir Desai, a law and business professor at Harvard, wrote an
[0:04] op-ed earlier this month on how Elon Musk's business empire may
[0:08] be starting to wobble. Now, while a lot has been made
[0:11] of Tesla's stock price halving in value since it hit, it's all
[0:14] time high in December. If we zoom out a bit, the stock
[0:18] price is still up more than 50% over the last year.
[0:22] Stock price alone doesn't necessarily tell us much about
[0:25] how a business is doing, as what Demoterin of NYU has long argued
[0:30] that company valuation shouldn't be approached as purely number
[0:34] crunching exercises. In his book Narrative and
[0:37] Numbers, he argues that valuation is instead a bridge
[0:41] between stories and numbers, where every story becomes a
[0:44] number in the valuation, and every number in a valuation has
[0:49] a story behind it. Matt Levine has argued in the
[0:52] past that Tesla investors don't value Tesla or any of Musk's
[0:57] companies on what they actually do.
[0:59] Instead, they think of them as venture capital funds run by a
[1:03] guy with a strong record of investing in whatever's the hot
[1:06] new thing. If the company's profits don't
[1:09] match up with the stock price today, that doesn't really
[1:13] matter to them, as next year a great new product will be
[1:16] unveiled. Solar roof tiles, a robot, a
[1:19] tunnel to Europe, A sports car with rockets on it, artificial
[1:23] general intelligence and everything out based on Twitter
[1:26] or a colony on Mars. And this business, which is just
[1:30] around the corner, will be so profitable that the naysayers
[1:34] will be proven wrong. Now, of course, I'm no naysayer.
[1:38] Long term viewers know how positive I've been about the
[1:41] Hyperloop at the heart of the line city in Saudi Arabia.
[1:45] And if it wasn't for the functionality of Musk's
[1:47] Hyperloop, the whole thing would make no sense.
[1:51] In a totally unrelated side note, Elon Musk told Fox News on
[1:55] Thursday that the administration is going to go after people
[1:59] pushing lies about Tesla. So just to be clear, I expect
[2:03] all of the above mentioned projects to be delivered next
[2:06] year on schedule, and I think that they'll be great.
[2:10] Desai in his article, says that while Elon Musk built a car
[2:15] company from the ground up along with a number of other
[2:18] businesses, which is no small feat, his wealth is mostly
[2:22] explained by a financial cult where Musk has been largely
[2:26] immune from critics. He writes that skyrocketing
[2:29] Tesla shares have made fans and investors so devoted that all
[2:34] Musk has to do is mention a new ambition to goad them into
[2:38] buying even more stock. And the larger the stated
[2:41] ambition, the more wealth and power they hand to him.
[2:45] He argues that since Musk's foray into politics, not just in
[2:49] the US but around the world, cracks in his empire have
[2:52] started to show. He highlights how automotive
[2:56] revenues and profits at Tesla have declined and points out
[3:00] that 22 years after the company's founding, it remains
[3:03] unclear if it can ever generate significant can free cash flow
[3:07] for shareholders. He says that Tesla appears to be
[3:10] relying more and more on price cuts, a practice that can
[3:14] increase sales in the short term but damages the brand in the
[3:18] long run. He says that the political
[3:20] backlash against MASK is now hurting Tesla sales, and that,
[3:24] perhaps sensing the shifting tides, Musk has been suggesting
[3:28] that Tesla is an AI company to further nourish the investor
[3:32] cult in. In looking at Musk's other
[3:35] business interests, the Harvard Business School professor argues
[3:39] that Solar City has atrophied since its controversial
[3:42] acquisition by Tesla in 2016, that it's unclear if the Boring
[3:46] Company has any revenues or prospects of profit, that the
[3:50] possibility of profits for Neural Link, the brain implant
[3:54] company, seems even more remote, and that Twitter is a shell of
[3:58] its former self both economically and culturally.
[4:01] Since its acquisition. He points out that SpaceX, which
[4:05] is more than 20 years old, has raised an estimated $12 billion
[4:10] and is only now rumored to possibly achieved $12 billion in
[4:14] annual revenue, which is not the same as profit mostly from
[4:19] Starlink. Desai makes the point that
[4:21] Musk's wealth is not derived from the cash flow his various
[4:25] businesses throw off. More money has gone into them
[4:28] than they've returned in profits.
[4:30] His wealth is derived instead from their stock valuations,
[4:34] which are driven by the hype around Musk and the belief that
[4:39] amazing breakthroughs are just around the corner.
[4:41] Musk's businesses have not been generating much hype of late.
[4:46] Growth seems to have halted and competition has grown.
[4:49] One of Tesla's most vocal investors has even called for
[4:53] Musk to step down as CEO. Tesla's stock price nearly
[4:57] doubled in value after Donald Trump's election win last
[5:00] November, driven by optimism that Musk's alliance with the
[5:04] new president would remove business obstacles and possibly
[5:08] pave the way for lucrative federal contracts.
[5:11] Tesla at the time faced a criminal fraud investigation and
[5:15] a related SEC investigation into exaggerated claims about the
[5:19] full self driving capability of its vehicles.
[5:22] It faced a joint investigation by the DOJ and SEC into misuse
[5:27] of company resources over plans to build a private residence for
[5:31] mosque using company funds. The US Attorney's Office was
[5:35] looking into whether Tesla had deliberately misrepresented the
[5:39] battery range of its electric cars to customers.
[5:42] There were 4 NITSA investigations into vehicle
[5:46] problems, 7 cases alleging unfair labor practices, a racial
[5:51] discrimination investigation, and an OSHA investigation into a
[5:55] worker's death. His other businesses faced
[5:58] investigations and federal lawsuits, too.
[6:01] President Trump replaced a number of government officials
[6:05] who had been overseeing many of these investigations and,
[6:08] according to the Washington Post, Elon Musk's, which was
[6:12] able to lay off staff at a number of agencies that regulate
[6:16] his businesses. When questioned about the
[6:18] conflicts of interest in a joint interview with President Trump
[6:22] on Fox News, Musk said I'll recuse myself if it's a conflict
[6:27] and the president said he won't be involved.
[6:30] While the ability to shut down investigations into his
[6:33] businesses should have helped him out, Elon Musk recently
[6:37] confessed in a Fox Business interview that he's running his
[6:40] businesses with great difficulty, and that does seem
[6:44] true. Tesla erased all of the stock
[6:47] price gains that it saw in the wake of the election, and the
[6:50] backlash against his companies was so severe that the president
[6:54] had to buy one of his cars on live TV while singing its
[6:58] praises, presumably to revive sales.
[7:01] Everything's computer. Musk's social media company
[7:05] Twitter was taken down by a cyber attack and two of his
[7:08] Starship rockets exploded shortly after their launches,
[7:12] grounding flights in Florida and the Caribbean and triggering
[7:16] warnings about falling spaceship debris.
[7:19] According to the European Automobile Manufacturers
[7:22] Association, Tesla sales in Europe fell for a second month
[7:26] in a row this February, and to make it worse, this was during a
[7:29] period when EV registrations overall on the continent grew.
[7:34] Tesla sales in Europe are down more than 40% so far this year,
[7:39] and the company's European market share has collapsed.
[7:42] The press blames this on a few things, like aging design,
[7:46] rising competition, and controversy around Elon Musk.
[7:51] The problem isn't just in Europe, either.
[7:54] According to Kelley Blue Book, Americans registered 11% fewer
[7:58] Teslas in January than they did a year ago, during a period when
[8:03] they registered 44% more electric vehicles from some
[8:07] rival brands. According to the website
[8:10] Futurism, Tesla sales in China have fallen 49.2% compared to
[8:16] the previous year, while BYD, Teslas biggest Chinese
[8:20] competitor, saw a 90% increase in sales over the same month.
[8:25] While sales declines in the United States and Europe can be
[8:29] blamed on Elon Musk's political activism, the Chinese are less
[8:33] concerned with American politics and liberal ideology and appear
[8:37] to be buying Chinese cars because they believe them to be
[8:40] more advanced and because they're significantly cheaper.
[8:44] The Electric Vehicle Council of Australia also reported a Tesla
[8:49] downturn, with sales falling by 70% in February 2025 versus
[8:55] February 2024. Interestingly, Tesla sales
[8:59] actually rose 20% in the UK last month, with the Model 3 coming
[9:04] 2nd and the Model Y placing third in February 2025 new car
[9:09] registrations. Another exception was in Canada,
[9:13] where Tesla sold about 8600 cars in just three days at 4 separate
[9:19] Tesla dealerships in Canada this January.
[9:22] This breaks down as one car every minute, 24 hours a day for
[9:26] three straight days, even when the stores were closed.
[9:30] This burst of sales came as an EV rebate program in Canada
[9:34] ended in January after the funds set aside for the program were
[9:38] allocated earlier than expected. The weekend before the program
[9:43] ended, there was a massive increase in claims from Tesla
[9:46] dealerships as the EV maker claimed over half of the
[9:49] remaining funds. Canadian news reports that
[9:53] hundreds of Teslas piled up in Canadian parking lots after the
[9:57] suspicious sales rush, and the Canadian government is now
[10:01] withholding the payments while they investigate any possible
[10:04] fraud. The Canadian Transport minister
[10:07] has barred Tesla from future rebates in other programs until
[10:12] the threat of US tariffs on Canada are withdrawn.
[10:16] Some of the global sales decline has been blamed on customers
[10:19] waiting to buy the refreshed Tesla Model Y, which just became
[10:24] available this month. But journalists are reporting
[10:27] that the new Model Y is showing on the Tesla website as being
[10:31] available for same day delivery today, which doesn't indicate
[10:35] the demand is awfully strong. Another reason that people might
[10:40] not be buying Tesla's is that at the rate that parts fall off of
[10:43] cyber trucks, there's no real need to buy one.
[10:46] If you really want one, you can just start collecting parts from
[10:49] the side of the road and after about a year you can just
[10:53] assemble your own one. The cyber truck is in many ways
[10:56] like a reverse kit car where they deliver you a fully
[10:59] assembled truck, but after a while you just have a collection
[11:03] of parts in boxes in your garage.
[11:06] At an all hands meeting with Tesla employees last week, Elon
[11:10] Musk predicted strong demand and told employees to hang on to
[11:14] your stock. His brother Kimball, who's a
[11:17] Tesla board member, sold $27 million worth of stock last
[11:21] month. And the chairwoman of the board,
[11:23] Robin Denholm, sold $33 million worth of stock, according to
[11:28] regulatory filings. So not all employees have been
[11:32] listening to him. Around half of Elon Musk's net
[11:35] worth is tied up in SpaceX, which owns Starlink, the
[11:39] dominant satellite Internet service provider.
[11:42] Possibly due to Musk's political connections, the service has
[11:46] been installed at the White House and Trump's Commerce
[11:49] Secretary has even lobbied officials to consider Starlink
[11:53] for the US Rural Broadband Access Program.
[11:56] Reports show that the Federal Aviation Authority has been
[12:00] asked to find funding for Starlink, possibly replacing a
[12:04] $2.4 billion fifteen year contract that was already
[12:07] awarded to Verizon to overhaul a communication system in 2023,
[12:13] according to the FT. Musk's foray into politics has
[12:18] also began to hamper Spacex's global expansion plans too.
[12:22] They report that the Ontario premier, Doug Ford, ripped up a
[12:26] $100 million deal with Starlink in response to US tariffs
[12:31] against Canada, and that Musks controversial behavior has
[12:35] caused problems for Starlink adoption in Brazil, Italy and
[12:39] even in his home country of South Africa.
[12:42] They write that European countries are so concerned with
[12:45] US threats to cut off Starlink access in Ukraine, a service
[12:49] that's paid for by Poland, that the EU is proposing to fund a
[12:53] homegrown alternative to Starlink for security purposes.
[12:58] While the news reports that Twitter is back above the $44
[13:02] billion price that Elon Musk paid for it in 2022, many
[13:06] investors are highly skeptical about this valuation as user
[13:10] numbers and advertising revenues have declined significantly
[13:14] since 2022. The transaction that values the
[13:18] business at $45 billion was XAI, another Elon Musk company buying
[13:24] it. A person who saw the documents
[13:27] described the earning innings number reported as being wildly
[13:30] adjusted to the FT. It's not obvious that an
[13:34] unrelated party would pay anything like that to buy the
[13:38] 12th most popular social network.
[13:41] This transaction is similar to when Tesla bought Solar City in
[13:44] 2016, where Musk folded a company that's been losing value
[13:49] into one that's been gaining value.
[13:51] He owned 54% of the AI company and used it to buy Twitter which
[13:56] he owned 80% of. The other investors in XAI
[14:01] shouldn't be too happy with this as they owned a clean investment
[14:04] in an AI company which is now saddled with a social media app
[14:09] that has lost its relevance. In recent weeks, anti Musk
[14:13] protests have been occurring at Tesla showrooms around the
[14:16] world, and they've even been incidents of Tesla cars and
[14:20] charging points being vandalised by protesters.
[14:23] Politico reports that Musk's government role, his
[14:26] antagonistic tweets, his boosting of far right
[14:29] propaganda, and the salute he gave at Trump's inauguration
[14:33] ceremony have made him a lightning rod for anti Trump
[14:37] sentiment and his products a target for protesters.
[14:41] The problem isn't just the protests.
[14:43] A recent UK survey found that 70% of Tesla owners say that
[14:48] they're ashamed of their car. It's not necessarily that they
[14:52] have strong feelings about Elon Musk, but just that driving
[14:55] around in a Tesla leads other people to think that they're
[14:59] Elon Musk fans, which they find embarrassing.
[15:02] Most people just want a car and they don't want it to be read as
[15:07] being a political statement. According to Joseph SPAC at UBS,
[15:11] while many American consumers approve of DOGE cuts in
[15:15] government spending, Musk may be turning off the US consumers
[15:19] most likely to buy a Tesla. He says that among high income
[15:23] consumers who say they plan to purchase an EV in the future,
[15:27] Tesla now ranks lower compared with competitors than it did one
[15:31] year ago. NPR reports that the Tesla brand
[15:36] has soared in popularity amongst Republicans and conservatives in
[15:40] the United States. But they say that the liberals,
[15:43] moderates, and independents that Musk is driving away are more
[15:47] likely to consider an electric vehicle.
[15:50] They say that Ev's towing problems can be an issue for
[15:53] Republican buyers who are significantly more likely to buy
[15:57] a truck and use their vehicle for work.
[16:00] The new fans that Elon Musk is winning over might like mask,
[16:04] but they don't want to buy an EV.
[16:06] So are Elon Musk's businesses in real trouble or are they just
[16:10] facing a temporary set back? Well, a few years ago, Tesla
[16:14] investors pitched the idea that we were on the path to a 100% EV
[16:19] future and that Tesla had no competition in that space.
[16:23] They is justified in their minds, Tesla being worth more
[16:27] than all other car companies combined today, the idea that
[16:32] ICE and hybrid vehicles will disappear is much more in
[16:35] question. Additionally, Tesla has
[16:37] significant competition from both traditional automakers and
[16:42] new manufacturers from China who might be beating Tesla on the
[16:46] tech front. BYD recently revealed new fast
[16:50] charging technology that can add 250 miles of range with a 5
[16:55] minute charge, significantly faster than Tesla and matching
[16:59] the convenience of a regular car.
[17:01] Tesla recently announced that it had completed regulatory
[17:05] approval for a paired back Chinese version of its Full Self
[17:09] Driving software that costs about $9000 extra per car in
[17:14] China, causing the stock price to rally sharply.
[17:17] But its biggest Chinese competitor, BYD, launched its
[17:21] own Full Self Driving software at no additional cost.
[17:25] The Tesla software alone costs as much as Byds cheapest
[17:29] vehicle. Tesla has been dead money for
[17:32] investors for quite some time. While Tesla investors celebrated
[17:37] in December 2020 when the stock was added to the S&P 500, the
[17:41] stock has just gone sideways since then and the S&P has
[17:45] almost doubled. Barons argued a few weeks ago
[17:49] that it didn't deserve to be in the magnificent 7A group of high
[17:53] growth stocks, as unlike the rest of the group, Tesla is a
[17:57] richly valued, highly volatile stock that trades on hopes for
[18:01] the future rather than dominance in the present.
[18:04] It's difficult to know how Trump's trade wars will work
[18:08] out, but for countries who want to retaliate, putting tariffs on
[18:12] Tesla cars and cancelling Starling subscriptions is an
[18:16] obvious response. While Trump's new tariffs on
[18:19] imported cars will hit Tesla along with all other automakers,
[18:24] as Tesla's contained 30 to 40% of foreign source components,
[18:28] analysts still report that the tariffs will hit its competitors
[18:32] harder and that Tesla will be the clear winner in the US
[18:36] market. Of course, retaliatory tariffs
[18:39] can be expected, and Tesla still sells the majority of their cars
[18:44] abroad. Valuing Elon Musk's business
[18:47] ventures has become much more difficult since he became
[18:50] involved in politics, as so much now depends on the evolving
[18:53] political landscape. For example, what happens to
[18:57] these businesses if Trump's friendship with Musk ends?
[19:01] While Elon Musk's cost cutting within the US government has
[19:05] been proceeding at a furious pace, the Washington Post
[19:09] pointed out that Musk himself is one of the greatest
[19:12] beneficiaries ever of U.S. government largesse.
[19:16] Over the years, they report that Musk and his businesses have
[19:20] received at least $38 billion in government contracts, loans,
[19:24] subsidies and tax credits. The US government support they
[19:28] show stretches back more than 20 years, but nearly 2/3 of the
[19:33] money was committed in the last five years, a lot of it during
[19:37] the Biden presidency. Just last year alone, they show
[19:40] that federal and local governments committed at least
[19:44] $6.3 billion to Musk's companies, the highest total to
[19:48] date. While this number might rise due
[19:51] to Musk's connections within the US government, it could equally
[19:55] collapse if Trump and Musk had a falling out.
[19:58] Today, Tesla is still valued at around 100 times its projected
[20:02] earnings, far more expensive than other auto manufacturers,
[20:06] which suggests that investors are.
[20:08] Pinning their hopes on new technological breakthroughs and
[20:12] rapid growth. And we'll have to wait and see
[20:15] how that works out. Thanks for tuning into this
[20:18] week's podcast, with special thanks to my supporters on
[20:21] Patreon who make this all happen.
[20:24] If you'd like to support the channel, you can sign up using
[20:27] the link in the show notes. Have a great day and talk to you
[20:30] again soon. Bye.

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