Elon Musk is not getting paid to build cars at Tesla

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Maurizio Pesce / Wikimedia Commons

  • Tesla CEO Elon Musk will now be paid nothing unless he increases his company’s market capitalization and the shareholders do very well.
  • Musk’s new compensation plan scraps any promise to hit vehicle production goals, which Tesla has always fallen short of.
  • An analyst predicted that Tesla could build 100,000 new Model S cars in 2018, versus 400,000 preorders.

LONDON – Tesla on Tuesday announced a new compensation plan for CEO Elon Musk, and he will not get paid a single dollar unless his company’s shareholders do extremely well.

Perhaps unfortunately for the 400,000 or so people who have preordered a Tesla electric vehicle, Musk’s compensation won’t be tied to his company’s ability to build cars.

Tesla has a history of struggling with production and has missed key targets. For example, after Musk said Tesla aimed to produce 20,000 Model 3 vehicles a month by this past December, the company delivered only 1,550 in the entire fourth quarter. Musk has also said he wants to build 500,000 vehicles this year, but that now seems unlikely given the now delayed production of the Model 3.

An analyst note from December projected just 100,000 Model S Teslas coming off the line in 2018.

Tesla’s stock has continued to outpace its competitors’, soaring by over 1,000% since the carmaker went public in 2010.

Rather than focus on building cars, as GM and Ford do, Musk’s new compensation schedule is “entirely contingent on achieving market cap and operational milestones that would make Tesla one of the most valuable companies in the world,” according to a press release.

For Musk’s compensation to fully vest, “Tesla’s market cap would have to grow to $650 billion (an increase of almost $600 billion), and important revenue and profitability goals would also have to be achieved,” the company said.

“Elon will receive no guaranteed compensation of any kind – no salary, no cash bonuses, and no equity that vests simply by the passage of time,” the release continued.

Is Tesla a car company?

tesla factory

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Tesla

Musk’s previous compensation plan included vehicle-production targets alongside milestones in increasing market capitalization, but that clause has been dropped from the new plan.

Tesla did mention plans to build “the company’s vehicle product line to cover all major forms of terrestrial transport,” as well as “expanding solar energy generation through Solar Roof and other solar products and seamlessly integrating them with battery storage,” but made no direct mention of increasing car production or reliability.

In Tesla’s release, it refers to itself as “the world’s first vertically-integrated sustainable energy company,” but in the electric-car business, Tesla finds itself increasingly facing rivals offering similar or in some ways better vehicles.