NEW YORK (Reuters Breakingviews) - Elon Musk is looking guilty of tweeting while driving – or some other distraction. Tesla’s chief executive is talking up autonomous vehicles, days after the company offered shareholders more say and said it was going to cull the board. The problem is, the $46 billion electric-car maker has more pressing concerns.
A couple of governance changes proposed in Tesla’s proxy, filed on Friday, should be welcome news for investors. If approved, one would replace with a simple majority vote the current need for two-thirds of investors to support certain changes to Tesla’s certificate of incorporation and bylaws. Another would remove a layer from the company’s staggered board and split director elections over two rather than three years – though annual elections for all would be best.
Reducing the size of the board from the current 11 members is more controversial. The good news is that three directors with close ties to Musk will no longer be around. But slimming down to a seven-strong board could limit the directors’ ability to support and monitor a company with big ambitions and a forceful CEO who owns a fifth of the shares.
Musk used Monday’s presentation to tout the firm’s self-driving technology. The long-term goal is clear: General Motors has estimated that an automaker building and running its own fleet of robo-taxis could bring in perhaps 10 times more revenue over the life of each car than at present. Even if Musk’s R&D team is stellar, though, the chances that robo-taxis and other self-driving cars will hit the streets en masse any time soon are slim.
Meanwhile, self-driving is almost an irrelevance for Tesla in the short term. On Wednesday analysts expect it to unveil a first-quarter loss. Sales figures suggest demand for the company’s Model 3 may have stalled in North America. Internet reports of problems ranging from missing screws to bad paint jobs abound, and there’s even one suggesting a parked Tesla exploded. Musk has already admitted to shortcomings in servicing and quality.
Tesla is not the only automaker facing such issues. But it’s practically alone at present in burning cash and could have less than $2 billion on hand by the end of the year, according to Evercore ISI. Raising capital ought to be at the top of the agenda.
Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.
Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.