Can Musk fix Tesla?

Can Musk fix Tesla? His announcement that he’s stepping back from DOGE suggests he’s starting to try. What governance issues does he have to tackle?

Tesla’s story has changed a lot in just a few months. It has gone from an organisation with years of steady growth, riding a wave of transition to electric vehicles, to a brand swept into severe volatility, and tied so strongly to politics that many stakeholders have reasonable grounds to worry. 

The company’s trajectory has been anything but predictable recently, and Elon Musk is a huge part of that. His work with the Department of Government Efficiency (DOGE) in the United States has shed a different light on the business.

Of course, Tesla has little to do with DOGE, but its association with Elon Musk’s personal brand means that it goes where he goes and suffers from much the same blowback. 

Now that Musk has reported he will step back from DOGE to focus on Tesla, we should examine the governance issues the company faces, which will reveal what Musk is up against.

Tesla has been on a rollercoaster since news first emerged that Musk would take a central role in the Trump administration. 

While there were highs, the company now faces a series of challenges. 

• In an announcement this week, Musk said that he will “significantly” reduce his involvement with DOGE and focus more on Tesla. 
• Tesla’s share price surged after Trump’s victory, but that gain was wiped away during Q1 of 2025. Adjusted net income in Q1 2025 fell 39% from 2024, short of analyst expectations.
• In that time, the company has had to deal with increased competition from other car manufacturers. It has also seen its reputation plummet in key markets. Germany is a notable example, where Musk’s support of the far-right AfD party has coincided with a dramatic reduction in sales, even though electric vehicle sales there are up overall. 
• Separately, Musk has been building a web of controversy through his actions as head of DOGE. Supporters claim he is eliminating unnecessary taxpayer expenses. Critics argue he is overreaching and culling essential initiatives. Legal challenges have ensued. While unrelated to Tesla, these events have drawn the company into the controversy, as it is closely aligned with Musk’s personal brand. 

It’s a tricky situation: Tesla remains a strong company; a decline in share price following a sudden surge is nothing new. However, the narrative is hard to ignore: the company now stands at a crossroads due to its reputation and leadership potential. Stakeholders want clarity. These things need to be addressed.

Whether he can or can’t depends on how he handles two critical governance issues:

Musk has always favoured the one-person-band approach to leadership. He likes executives and directors who support his ideas rather than challenge them. It’s questionable governance, but it’s the approach he prefers. 

This means, however, that his strong-armed approach is necessary whenever the company runs into trouble. And since he began work at DOGE, it is fair to say that his presence has been missed, especially when considering issues that have arisen organically, such as increased competition from other manufacturers or tariffs affecting production lines. Tesla needs to make smart planning decisions and ensure it retains a significant market share in spite of these challenges. Without Musk, the leadership style he champions so much, that decision-making is paralysed. 

Tesla is tied to Musk, and Musk is tied to Trump. Allowing a company’s brand to become so closely aligned with a polarising political figure is a major reputational risk. In governance, we know that while reputations can be undone quickly, they often take years to rebuild. 

The most pressing consequence of the last few months is that Tesla is losing consumer trust in key markets. Musk has associated it with political positions that have nothing to do with cars, and little to do with the preferences of its customers. 

In his announcement that he would step back from DOGE, Musk specified that he would remain as head of the department in a reduced capacity, so that the reputational knot will continue for the time being. 

And realistically, even if Musk left DOGE today, people will remember his associations with Trump’s administration for a long time after. The stickers on the back of Teslas worldwide, promising that they were bought before Musk’s shift to the right, will remain, because once a narrative like that exists, it’s hard to deconstruct it.

Can Musk fix Tesla? It depends on how he handles the two governance issues above. 

Will he be able to dedicate enough time to the company to develop new ideas and strategies? If he does, then stakeholders may find some reassurance that has been missing since last November. If he can’t, then they will continue to miss that strong top-down approach they have been told to expect. His announcement that he would be giving more time to Tesla did push the share price up, so we know there is some confidence there. 

Will he be able to distance Tesla from the Trump administration? That’s a bigger question that will take a longer time to answer. The short-term outlook is that he will probably not be able. Why? Because he still works for Trump, and so Tesla remains associated with his administration. Escaping that reputation will require a significant amount of work and a shift in focus.