Elon Musk has chosen a successor at Tesla, the $600 billion electric carmaker intimately connected with the serial entrepreneur.
Officially CEO since mid-2008, but by his own words effectively running Tesla since he invested in the company back in 2004, Musk appears to have reached a decision this year as to who must one day fill his considerable shoes.
Board director James Murdoch, son of the Australian media tycoon Rupert Murdoch, told the Delaware Court of Chancery there is in fact a name upon which Musk has settled.
“He actually has,” he said while taking the stand as co-defendant, after being asked if a potential successor had been chosen. Murdoch added this happened in the "last few months," but did not provide further details.
Just how formalized a decision it is remains unclear, as is whether the board has granted its consent.
It is also not certain whether that individual has agreed in principle or in writing as yet, or even whether they know about it at all.
Furthermore, the plan may not go into action anytime soon and it is always possible that later down the line, decisions may change—so by no means should this be considered a done deal based on the information known.
The news emerged in part because several board directors are on trial over the company's historically high CEO compensation package, and they need to prove to the presiding judge that Musk’s myriad interests made him a flight risk at Tesla.
In order to ensure he remained properly engaged in creating value for their shareholders, they argue, he had to be rewarded with a $56 billion stock option package tied to milestone achievements.
So who might the chosen one be? Here are a few heavily favored candidates to replace Musk at the top of Tesla.
Drew Baglino
The job is really his to lose. The senior vice president for powertrain and energy engineering is the company’s most senior engineer behind Musk.
He’s the mastermind behind the move to a next-generation vehicle powertrain using advanced 4680 battery cells. These are expected to feature innovations capable of removing entire process steps from production, such as the introduction of dry electrodes. Collectively they should reduce the per-kilowatt-hour cost of each battery by half, and help Tesla maintain leadership in the EV industry over the course of this decade.
Baglino is the only engineer apart from Musk to regularly brief investors on important developments during quarterly earnings calls. With his expertise cutting across both Tesla's automotive and energy storage businesses, he’s the obvious choice.
Omead Afshar
Described alternatively as a fixer or right-hand man to the entrepreneur, Afshar works as a senior director in Musk’s office of the CEO at Tesla. He is considered to excel at execution, and most recently oversaw the construction of Tesla’s massive new factory in Texas that will build the Cybertruck pickup.
He could be a potential solution if Musk were to resign from his day-to-day role in favor of replacing Robyn Denholm as board chair in order to continue playing an active, albeit less frequent, role from behind closed doors. In this constellation, Afshar would be a capable lieutenant should Musk want someone to serve more as an operational CEO than a strategic one looking to chart a new path.
Ashok Elluswamy
Key to Tesla’s reputation as a tech company rather than a carmaker is its capabilities in the field of advanced artificial intelligence. This was once the realm of Andrej Karpathy, but the senior director of A.I. departed earlier this year. Into his place moved Elluswamy, who leads Tesla’s most important make-or-break technology—full self-driving.
Not only is the software behind FSD critical to developing an upcoming robo-taxi model, but it also will power the intelligence of Tesla’s Optimus droid. Elluswamy, or potentially his close colleague Milan Kovac, would be a potential candidate given Musk wants to rebrand Tesla as an AI company where cars are just four-wheeled robots alongside bipeds like Optimus. Both men were recently entrusted with helping Musk analyze software weaknesses at his other company, Twitter.
Zach Kirkhorn
The finance chief has delivered consistently excellent numbers since he took over from Depak Ahuja in March 2019. Profit margins have actually increased even as smaller, lower-priced vehicles like the Model 3 were rolled out, and the key is his tight control over costs. Earnings rise disproportionately higher to vehicle sales growth, in part because operating expenses remain astonishingly lean.
Kirkhorn would be a CEO trusted by the investor community, and while Musk is known to heavily favor engineers over bean counters, he may have decided that a numbers man at the top of the company could free up the brains like Baglino to focus on what they do best: develop industry-leading products.
JB Straubel
Many long-term Tesla fans would like to see a return of JB, a key companion of Musk during the earlier days of the company. Straubel, who had been at the EV pioneer almost from the very beginning of the company's founding left in 2019 after 15 years to run his own company, an EV battery recycling firm called Redwood Materials.
The two maintain a friendly relationship based on mutual respect, and they reconnected recently at a Financial Times event where they reminisced about the company's difficult start. One scenario viewed as ideal by some investors, therefore, is if Tesla were to expand its vertical integration by acquiring Straubel’s recycling company and groom him to be Musk’s replacement.
Dark horse
Musk is a capricious CEO, someone who trusts his gut instinct—whether it’s developing a polarizing model like the Cybertruck that initially repelled with its alien design, or choosing to rely solely on cameras for advanced driver assistant systems while eschewing LiDAR, radar, and even ultrasonic sensors.
He might feel an outsider would be better suited to shake things up, and reportedly has considered external candidates like Herbert Diess. The ex-Volkswagen Group CEO is known to be almost as demanding a manager as Musk, someone who challenges internal conventions and is a visionary in his own right. While Diess, who cultivated a mutually friendly rivalry with Musk, is no longer an ideal age, Musk could look for someone along the same mold.
So when could this happen?
Likely not for some time, but it’s always good for a board to have a contingency plan in place.
This is especially true given that Musk is currently diverting his attention away to manage another company—much to the chagrin of Tesla's shareholders.
“I will continue to run Twitter until it is in a strong place, which will take some time,” he posted on Wednesday in the latest sign the social media platform is consuming the better part of his management capacities.
A still youthful 51 years of age, Musk, who claims to have shed 30 pounds fasting recently, remains the company’s largest shareholder, and his vast wealth derives from the value of his stock.
That means he is properly motivated to continue playing a major role for the foreseeable future.
