The Tesla Supercharger Massacre

May 2, 2024

The Tesla Supercharger Massacre

May 1

The automotive and EV world is abuzz over Elon’s abrupt firing of Tesla’s entire Supercharger team — around 500 employees — earlier this week. This shocking news has been a real mind twister to the automotive world since Tesla’s class-leading Supercharger network has historically been a huge selling advantage to the brand and the Tesla Supercharger team were seen inside the industry as the best in the business. Amidst a shaky stock price over the last year and drooping sales, along with a costly price cutting war in the EV market, it’s hard to understand why Elon Musk took the axe the highest regarded silo of his EV company.

Compounding all this is the fact that Tesla’s NACS standard has won the big Betamax vs VHS DC fast-charging war and those Tesla Supercharger stations are going to certainly become busier and busier.

So why Elon? Why?

I have a theory. Or more accurately, a guess.

Elon has says he believes the future of Tesla lies in being the undisputed leader in both AI tech and the future’s vast robotaxi market, which he believes will completely overtake traditional automotive mobility. If that is your view of the future, running a retail Electric Vehicle business is a certain loser in the long term. Like all of his peers in the automotive business, Elon also can see a scary horde of cheap yet good quality Chinese EV’s flooding the U.S. market. That means brutal price competition and crushed future profit margins. So on to robotaxis!

Remember, a central argument for autonomous vehicles is that once vehicles can drive themselves, they will spend a lot more time on the road working and earning, as taxis, instead of sitting idly in garages; a hugely wasteful use of capital investment. With these autonomous vehicles working all the time instead of a few hours a day, the future will need a lot fewer vehicles. Not great to be in the traditional vehicle business. Brutal disruption is coming.

So, my imaginary Elon Musk thinks to himself, “why invest a ton more capital in building out scores of additional expensive DCFC stations to charge future cars that will not exist, at least not in anywhere near the numbers that exist now?”

And don’t forget, the DC fast charger business is brutally difficult. Capital costs are high and margins are very thin. Electric utilities charge a lot for daytime power through so-called “demand charges” which really gut the profit margin most station operators make from reselling that expensive power at the retail level to EV drivers. Check out EVGO’s financials sometime. (God Bless ‘em for trying though!)

So, image this thought bubble in Elon’s head: “I’ve already built and paid for the biggest and most popular fast-charging network in America (and much of Europe). Time to stop spending the big money and milk the beautiful network I have for greater profits!”

Currently the average DC Fast charger (across all networks) has an 18% utilization rate. Now that Ford, Rivian and soon every other brand will be making cars that work on Tesla fast-chargers, either natively for future cars or with an adaptor for current and older models.

So, Elon thinks to himself, “the utilization rate on my existing network is going to skyrocket, tripling or more, and thereby making each Tesla charger unit generate more and more gross income every day, albeit at a thin profit margin because of those damn utilities. My best move to cut cost and maximize profits is to stop pouring a fortune into building even more charging stations and start cashing in on my current charging empire. So why do I need 500 people on my payroll constantly looking for new expensive charging stations to build out? New rent payments to make? New expensive hardware to build and install?

Lordy! I’m paying people to find ways to spend money I don’t need to spend!

Nope! Time for a new plan: I’m going to milk the enormous cow I already own!”

Elon is probably thinking it’s time for the deep-pocketed Ionna Alliance and other new entrants throw a lot of their cash at building out more DCFC stations. He’ll switch to maximizing profit potential on the station network he already has and use the money to hire more AI engineers and invest in robotaxi tech R&D to jump ahead of everybody else, just like he did years ago by building the first big, effective, reliable DCFC network.

So Elon has now taken his first step toward slowly cashing out of the consumer EV empire-building business. Of course, there will still have to be significant investment in maintaining and upgrading existing hardware. And I’ll guess that Tesla will still build out a few more stations in strategic places. But the days of rapid Tesla DCFC buildouts appears to be over.

Elon probably figures he can do all that maintainence stuff that with a much smaller team and far less spending. (It’s also true that Tesla has more competition for charging locations now, which means building new stations is more expensive than ever. I was involved in a big EV charging location deal and Tesla won the site, but only with a very large annual rent check to the very savvy landlord, effectively having to buy the location out from other players. Ouch!)

Of course from a marketing and HR point of view, Elon’s Supercharging Team Massacre was an epic disaster.

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Too fast, too brutal, no greater narrative to it all: just 500 flying hatchets. The EV booster community is in a total uproar and understandably so. This drama is not good for the wider cause of EV adoption as charging worries are a key weak spot among EV dubious consumers. Nor does wiping out the silo of the company Tesla was most respected for help Tesla the business at all. These sort of blunt force moves rattle Wall Street, make valuable employees shy away from working at Tesla (a big mistake in tech companies where employees are the key asset) and scare potential future Tesla consumers away. Maybe you can argue Elon’s AI and robotaxi Grand Vision is the right one for Tesla, but such cruel and clumsy meat-axe tactics are a big execution mistake.

Now, I’m sure concern about Elon as Tesla CEO will grow. Elon is already generating marketing headwinds for Tesla; something Wall Street is increasingly worried about. (See our earlier post with a few charts full of fascinating polling data on Elon.)

Tesla used to lead the world in selling popular EVs. Today, it is leading the industry in drama. Not good for the cause or the company.

DAY TWO UPDATE: Tesla’s email announcement that it is freezing most current Supercharger siting projects only makes me more convinced that my theory as discussed above is Elon’s big plan. The next thing I’m watching carefully is developments at Tesla’s DCFC production line in Buffalo. There will be work needed to produce more v4 units to upgrade the current network, especially since many of Tesla’s current DCFC units are becoming long in the tooth and falling behind the competition in power and performance. But with Tesla’s multi-year rush to build new statins at a face pace now ending, will Elon will either have to reduce Buffalo’s current rate of DCFC hardware production or try to start selling those Tesla DCFC units into the wider charging hardware marketplace, crowded and competitive as it is. Tesla dipped a toe into selling its chargers to outside operators already in Europe. Will be interesting to see if Elon tries to monetize his hardware producing capacity at Buffalo as well.