The Journal. - Why Is Tesla Pulling Back on EV Charging?

Episode Date: May 7, 2024

Tesla announced last week that it’s laying off the team responsible for the biggest electric-vehicle charging network in the U.S. The move comes as consumer demand for EVs is dwindling. WSJ’s Jennifer Hiller reports on how the layoffs shocked the industry and how the change will impact efforts to build out a national EV charging network. Further Reading: -Tesla Is Pulling Back From EV Charging, and People Are Freaking Out  -As Electric-Vehicle Shoppers Hesitate, Hybrid Sales Surge  Further Listening: -Money, Drugs, Elon Musk and Tesla’s Board  -How China’s BYD Overtook Tesla  Learn more about your ad choices. Visit megaphone.fm/adchoices

If you drive an electric vehicle, you know that range anxiety is a real thing. The fear that your battery could die when you're out on the road. Our colleague Jennifer Hiller says it's one of the things that's holding people back from buying EVs. EV charging can make a lot of EV drivers uneasy. Because you have to do just a little bit more thinking about where you're going to stop and just what path you're going to take and if there's chargers along the way.

I have 4% left and the closest charger is 4.6 miles away. So that's not good. My car currently says zero miles left. And obviously the harder you drive, the more battery you're using. So I'm going to try to have a light foot today because I really don't want to lose power in the middle of the highway. I barely have enough range to make it to the next charger, but I have to go, so I'm going to risk it. Most people who own EVs right now own homes, and so a lot of people can charge in their garage or in their driveway.

Where you hear concern is from people who are in apartments or condos or maybe renting, and they may not have easy access to be able to charge at home. One company has done more than any other to address this issue. Tesla. Tesla started building a charging network over a decade ago. And now it has thousands of charging stations across the U.S., allowing drivers to juice up their cars in about a half an hour. I think they realized essentially far before other people did that you had to have the chargers in the ground to be able to get people to buy the cars.

And so they put a lot of capital into building out this network that allowed it to sell a whole bunch of EVs. But last week, Elon Musk, the company's CEO, made a surprising announcement. He said he was firing everyone on the charging team, shocking people across the rest of the EV industry. I mean, they're just kind of baffled. I think a lot of people across the industry have, you know, just said this is kind of a head-scratcher, and nobody knows quite what to think about it. what to think about it.

Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudsen. It's Tuesday, May 7th. Coming up on the show, Tesla led the charge in EV charging. Now it's pulling the plug. Attention all soccer fans. From Orlando to Los Angeles,

take to the fields of the USA for your next vacation. Ready to kick off? Discover exciting games and events. Plus, find amazing hidden gems in cities full of adventures, delicious food, and diverse cultures. You'll love it so much you'll want to extend your stay beyond the matches. Get the ball rolling on your soccer getaway. Head to visittheusa.com. Last week, Elon Musk emailed Tesla staff and told them there were big changes coming to the company's charging division.

There was a message that went out late Monday night letting other people in the organization know that he was going to dismiss people in the supercharger group. There was another internal email that went out to people who were laid off that sort of said, dear employee, as you know, we recently announced a significant decision that impacts the entire organization and you directly. I'm sorry, dear employee? They don't even have people's names when they lay them off? No, it was a dear employee message.

And then he did tweet on Tuesday, so sort of hours after news about this was coming out and laid off employees were posting on social media and people were trying to figure out what had happened at Tesla within the supercharger group. He did post a message on X, formerly Twitter, Tesla still plans to grow the supercharger network just at a slower pace for new locations and more focus on 100% uptime and expansion of existing locations. So Tesla's not getting rid of its supercharger network. It's just planning to stop growing it for the most part or grow it much, much more slowly. Yeah. And we don't obviously know everything about what Tesla is planning to do here. There's no indication that they're getting rid of the supercharger network. That's

a very valuable network. They just spent a long time, you of the supercharger network. That's a very valuable network. They just spent a long time, you know, building it out. It's a vehicle that they use to sell cars. But yeah, it's clear that the growth of superchargers in new locations will slow down. Tesla employees weren't the only ones caught off guard by Musk's email. The people who have had sort of direct business relationships with Tesla that suddenly don't have people to reach out to and are getting bounce back emails from the company and things like that are just kind of confused. There are contractors that were working on sites for Tesla that just kind of stopped work at those new supercharger sites. There are property owners that had sites that they were in the process of leasing to Tesla that now also haven't heard anything from the company.

And all of the people that they had been working with on their projects got laid off. So there hasn't been a ton of communication at this point. Jennifer spoke to some of Tesla's partners, who were critical of how the company handled the layoffs. Tesla is so well regarded in this area, and it's such a large company, that to have just sort of an abrupt loss of communication like that, it's just not something that you would expect from like a well-established player in any industry. And this is kind of the industry leader in this area.

And so just to have kind of silence suddenly is, I think, a little bit disconcerting to people. One contractor has since told Jennifer that he did eventually hear from Tesla. The company told him that work will continue on projects that were already in progress. Tesla did not respond to our requests for comment. Tesla's decision will have implications for the entire EV industry. People for years have been sort of clamoring to get into the Tesla network. It's been considered a, a lot of people have called it a walled garden, essentially, because it was just for Teslas and it was only to charge Teslas. A year ago, there were several agreements with outside automakers that would give drivers of other vehicles access to the Tesla network. These car companies hoped access to Tesla's chargers would spur more consumers to buy electric cars.

Some automakers even started changing their plugs to match Tesla's technology. It was a huge deal, just in that it was going to open up the Tesla network to thousands of other EV drivers. Drivers of Ford and GM and Rivian and other companies were going to have access to that network. And it was seen as something that was also going to help those companies sell cars. But it was also a bit of a gamble on Tesla's part and sort of a bet that growing the entire EV market was going to be good for them, even if it was good for other companies as well. Even the U.S. government was counting on Tesla's chargers.

The company had applied for and received nearly $30 million in federal funding to build around 70 new charging sites. government was counting on Tesla's chargers. The company had applied for and received nearly $30 million in federal funding to build around 70 new charging sites. The country just needs a lot of chargers. You know, chargers need to become a lot more ubiquitous. People need to see them to have a level of comfort if you are going to have a lot of people switch over to EVs. So why did Tesla decide to cut back on its charging division? That's after the break. Own each step with Peloton. From their pop runs to walk and talks, you define what it means to be a runner. Whatever your level, embrace it.

Journey starts when you say so. If you've got five minutes or 50, Peloton Tread has workouts you can work in. Or bring your classes with you for outdoor runs, walks, and hikes led by expert instructors on the Peloton app. Call yourself a runner. Peloton All Access Membership Separate. Learn more at onepeloton.ca slash running. Your teen requested a ride,

but this time, not from you. It's through their Uber Teen account. It's an Uber account that allows your teen to request a ride under your supervision with live trip tracking and highly rated drivers. Add your teen to your Uber account today. So let's talk about the lead up to Tesla's decision to cut the charging team and the employees that work on it. How has Tesla's business been doing lately? and the employees that work on it. How has Tesla's business been doing lately?

So Tesla and the entire EV market have been struggling a little bit. You know, about a year ago, inventories started to build up and dealers were complaining about, you know, they had too many EVs on the lot and they were taking too long to sell. And over the last several months, you've seen a little bit of a pivot towards hybrids. And hybrids are selling really well. People seem to be excited about buying those. And a lot of automakers are adding more hybrids to their lineup and seeing that as sort of an intermediate step towards EVs. Tesla, which for years had seen blockbuster sales, has also faced weaker demand. Tesla is falling out of favor with American consumers.

Tesla is slashing prices in key markets, including China and Germany. Tesla down 5% today. Been a tough start to the year. This after deliveries fell short of expectations. Last month, Musk said that Tesla needed to reduce costs and increase productivity. He announced the company planned to slash more than 10% of its global workforce. And then, last week,

came the layoffs to the charging division. Of all the areas that Tesla could cut back in, why would it want to cut back in charging? Well, I think we're just sort of guessing here, but they've got a good charging network already. So they have a large base of chargers that are already out there. So if they want to focus on their existing locations and adding more chargers at sites that they already own. That would be one path for them to take. But broadly speaking, adding chargers and building out a charging network is an expensive thing to do. It's a large capital cost.

These are complicated sites. They look simple from the outside, but there is complicated electrical equipment and there is a lot of utility infrastructure that sort of undergirds a charging site. And so these look like simple sites, but they're actually, they can be quite expensive to put in. Right. And I imagine not only are they expensive to put in, but they probably take a little bit of time in order to start making money off of them. take a little bit of time in order to start making money off of them. Exactly. So you spend a lot of capital up front to build a charging site, and then you make that money back kind of slowly over time as more people come to charge. And so it's just a very slow payback probably compared to a lot of other things that Tesla is making money on. Could this be kind of short-sighted on Tesla's

part though? I mean like one reason consumers say they're reluctant to buy an EV is because they're nervous about charging and now Tesla is pulling back on adding more charging stations. It could and we just don't know that. It will certainly slow the pace at which we see more chargers added to U.S. highways and U.S. cities. If you have one of the key players pulling back a little bit, it's going to pull back that entire market. But we just don't know really how this is going to get digested. I think this is maybe another sign that it's going to be a little bit more of a bumpy adoption path than what people were expecting. I think a lot of people were looking at the EV adoption numbers and the addition of charging equipment across the country as being something that, kind of on a chart going up and to the right at a very steady pace.

And maybe we will go in fits and starts. Are there any other companies that build charging stations that might step up and try to start filling this demand? There are a lot of other companies that build chargers. There are a lot of other companies that build chargers. There are companies like Electrify America, which is owned by Volkswagen. Mercedes has been investing a lot of money now into public charging. And we have companies like major retailers like Walmart and others who are saying we are going to invest in our own charging networks and start spending a lot of money here. So there's still a lot of investment going on across the charging industry. And there is definitely potentially an opportunity for companies to move into this space in a stronger way and maybe pick up some of Tesla's business. But if Tesla had such a well-oiled machine here that took so many years to develop, you know, those are pretty big shoes to fill. It is. It is. And at the same time,

now there are a lot of Tesla employees who are looking for jobs and are on the market. So there is a lot of experience out there. There's nobody quite as well-oiled at this point as the Tesla team was. But I guess we will find out who's able to grow a little bit and take some of that market share, perhaps. But I guess, you know, electric vehicles don't take oil anyway, right? No. So we have to find another metaphor. We've got to get rid of the well-oiled metaphor. Okay. They were a fully charged machine of the well-oiled metaphor. Okay.

They were a fully charged machine, maybe is the thing to say. That's all for today. Tuesday, May 7th. The Journal is a co-production of Spotify and The Wall Street Journal. Additional reporting in this episode by Rebecca Elliott, Ryan Felton, and Sean McClain. Thanks for listening. See you tomorrow.