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Just because you are a great entrepreneur, it does not make you immune from making mistakes.
Consider Elon Musk -- a world-changing entrepreneur with a blend of great successes and notable failures. For instance, he took over as Tesla CEO in 2008 and turned the electric vehicle maker into the world's most valuable automobile company.
Sadly, 2024 has featured many strategic blunders under Musk's leadership of Tesla. The company's stock had fallen 35 percent this year as of April 15.
The company's sales and market share have also declined. Tesla sales fell more than 13 percent while "most of its emerging competitors saw double or even triple-digit growth. Legacy car brands like Hyundai, Mercedes and BMW have also increased their EV sales and chipped away at Tesla's market share," according to The New York Times.
Here's a look at the strategic blunders behind Tesla's woes and the lessons for business leaders.
1. Give customers unbeatable value
If you create a new industry and challenge incumbents with your success, you can be excused for thinking you are smarter than everyone else and every idea you have is genius.
Such complacency can cause you as a leader to ignore the needs of customers, because you think of yourself as the only one who can create the future you know they need.
While that mindset worked for Musk for a while, it is not working anymore. He was able to win over a wealthy segment of vehicle buyers by creating blindingly fast and stylish EVs at very high prices.
Sadly, those vehicles had a relatively high rate of defects, according to JD Power, and the quality of Tesla's customer service leaves much to be desired, as a Tesla owner explained to me in 2020.
Consumers are getting far more value-sensitive -- meaning they want a safe, low-cost way to drive. Lower gasoline prices, relatively high EV prices, long battery charging times, and significant range anxiety are among the challenges EV makers must overcome to win customers, I wrote in January.
Musk's most significant strategic blunder has been to assume customers would keep buying Tesla's current lineup -- despite the high prices, quality problems, poor service, and insufficient charging network.
Musk could get away with this when Tesla was unchallenged by rivals. Complacency caused him to ignore competitors seeking to grab a piece of the growth and profitability he have created.
Now China-based rivals BYD -- which offers a $25,000 Seal sedan priced way below Tesla's cheapest model -- and Li Auto are responding to the consumer preferences I mentioned above by setting much lower prices for their EVs, I wrote in in an April 14 Forbes post, thus capturing Chinese market share from Tesla.
Can Tesla make a profit if it sells models that undercut BYD? To the company's credit, Tesla will reportedly cut "more than 10 percent" of its roughly 140,000 workers, according to Reuters.
Yet cutting people is not enough to help Tesla win value-sensitive customers. Musk should bolster Tesla's competitive weaknesses.
More specifically, Tesla must launch a vehicle to stop the loss of market share to rivals such as BYD.
Rather than rush the company's Model 2 to market to win over value-sensitive customers, Tesla appears to be running away from them. "Reuters reported Tesla had scrapped its plans for a long-promised, lower-cost electric vehicle, known as the Model 2. Musk denied the report by saying, 'Reuters is lying,' " noted MarketWatch.
One analyst expressed distrust of Musk's response to the Model 2 cancellation report. There is "little evidence that it is aggressively in progress, as we would expect for a car due to start producing at commercial scale at the end of next year, per Elon's latest dubious promise," noted Vicki Bryan, founder and CEO of the Bond Angle, in an email featured by MarketWatch.
Instead, Musk is touting a robotaxi to be revealed in August -- a self-driving vehicle with no ability for drivers to take control.
In my view, Tesla's robotaxi is unlikely to boost the company's revenue growth. After all, Tesla lags Alphabet's Waymo, which has not built a significant business operating such vehicles. Moreover, Tesla has yet to master the self-driving technology needed to make robotaxis work, nor has the company received permits needed to operate them, noted NBC News.
Don't make the mistakes that led Tesla to this impasse. Instead, leaders should
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