Elon Musk Seeks Higher Tesla Voting Rights Before AI Advancements

Tesla (NYSE: TSLA) CEO Elon Musk is seeking higher voting rights in Tesla and has said that he would consider building artificial intelligence (AI) products outside the company if he does not get around a quarter of voting rights.

In a post on X (formerly Twitter), Musk said, “I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control. Enough to be influential, but not so much that I can’t be overturned.”

Musk added, “Unless that is the case, I would prefer to build products outside of Tesla. You don’t seem to understand that Tesla is not one startup, but a dozen. Simply look at the delta between what Tesla does and GM. As for stock ownership itself being enough motivation, Fidelity and other own similar stakes to me. Why don’t they show up for work?”

Musk publicly calls for more Tesla voting rights

Currently, Musk owns around 13% stake in Tesla and his ownership fell after he sold shares to fund his Twitter acquisition. In his Twitter thread, Musk said, “If I have 25%, it means I am influential, but can be overridden if twice as many shareholders vote against me vs for me. At 15% or lower, the for/against ratio to override me makes a takeover by dubious interests too easy. I would be fine with a dual class voting structure to achieve this, but am told it is impossible to achieve post-IPO in Delaware.”

His public call for higher voting rights in Tesla is seen as a ploy to pressure Tesla’s board for a new compensation structure. Tesla shareholder Richard Tornetta sued Musk and the board in 2018 over Musk’s compensation structure. While Musk got billions of dollars as part of the compensation package, he is not required to work full-time at the company.

If anything, since that compensation package, Musk has two new companies in the form of X and AI startup X.AI. Incidentally, one of the reasons Tesla shares crashed 65% in 2022 was because markets were apprehensive about Musk’s association with X. While the billionaire has since relinquished the position as X’s CEO, he is still seen to be calling the shots at the social media company.

AI and software account for the bulk of Tesla’s valuation

Here it is worth noting that AI and software including autonomous driving account for the bulk of Tesla’s valuation. The company’s market cap is currently at around $700 billion and peaked at above $1.2 billion in November 2021.

Musk has also acknowledged multiple times that the bulk of Tesla’s valuation comes from the software business. That said, the automotive business still accounts for the bulk of Tesla’s valuation.

TSLA stock has fallen in 2024

Meanwhile, Musk’s threat to build AI products outside Tesla is yet another risk for the company and would only add to the troubles. Tesla stock is down almost 12% this year as it faces multiple challenges.

Earlier this month, Tesla halted production in its Berlin plant due to the Red Sea crisis. In its statement, Tesla said, “The armed conflicts in the Red Sea and the associated shifts in transport routes between Europe and Asia via the Cape of Good Hope are also having an impact on production in Gruenheide.”

The company added, “The considerably longer transportation times are creating a gap in supply chains.” Notably, the plant relies on imports from Tesla’s China factory and has been hit by a shortage of key components.

EV price war

Tesla recently lowered prices for some of its Model 3 and Model Y variants in China. The Model 3 Rear Wheel Drive would cost $34,639 in China which is down 5.9% from the previous price. Tesla has also lowered the price of Model 3 All-Wheel Drive by 3.9%.

Tesla also cut prices for some Model Y variants but spared Model Y Performance from the price cuts. The company has also stopped giving the insurance subsidy for Model 3 vehicles.

Tesla’s price cuts would only add fuel to the fire in the price war in the world’s biggest market for electric cars. Notably, Li Auto has also cut prices on some of its vehicles as the company looks to further scale up production after hitting a monthly delivery run rate of 50,000 vehicles in December.

Hertz sells Tesla cars

Hertz announced that it is cutting its EV fleet by 20,000. In 2021, Hertz made the famous pivot to EVs and said that it would buy 100,000 Tesla vehicles.

Things however have changed since then and far from being in short supply, there is an abundance of electric cars and automakers across the board are delaying their EV investments and multiple companies cut their 2023 production guidance due to weak demand.

Hertz also blamed Tesla’s price war which has led to a steep decline in prices of sued TSLA cars.

Meanwhile, Tesla looks set to continue its dismal 2024 run and the shares are down in premarkets today after Musk’s threat to build AI products outside the company.