Tesla (NASDAQ: TSLA) issued a categorical denial of reports that its board had begun looking for a successor to CEO Elon Musk.

The rebuttal follows a Wall Street Journal report citing multiple sources who claimed the board began reaching out to executive search firms last month amid frustration over Musk’s inattention to Tesla and a plunging stock price. According to the report, directors had advised Musk to publicly recommit to the company—an intervention Musk did not reportedly contest.

Tesla Chair Robyn Denholm dismissed the report as “absolutely false” and claimed the company had made that denial “before the article was published.” Musk himself lashed out on X, calling it a “discredit to journalism” and a “deliberately false article.” He later reposted a comment calling the paper “trash.”

“The CEO of Tesla is Elon Musk and the Board is highly confident in his ability to continue executing on the exciting growth plan ahead,” Denholm added.

Failing fundamentals

The board’s supposed decision to replace Musk wasn’t without legs to stand up on especially after it came on the heels of a 71% plunge in Q1 net income and a 9% decline in revenue compared to the same period last year—Tesla’s worst quarter in years. Automotive revenue, which comprises the bulk of Tesla’s business, fell 20% year-over-year as the company struggled with slumping sales in core markets like California, China, and Germany.

Gross margins, once the envy of the auto industry, have been eroded by aggressive price cuts.

READ: Tesla Q1 2025: Worst Quarter Since 2020

According to The Wall Street Journal report, while Tesla battles on multiple fronts—product delays, intensifying EV competition, brand backlash—the company’s board has grown increasingly concerned with Musk’s focus, or lack thereof. Since President Donald Trump’s re-election, Musk has spent most of his time in Washington, leading the Department of Government Efficiency, advising on federal spending cuts, and participating in cabinet-level meetings.

Board members reportedly confronted Musk last month, urging him to publicly commit more time to Tesla. He didn’t object. On a recent earnings call, he told investors: “Starting next month, I’ll be allocating far more of my time to Tesla.”

The board subsequently engaged a leading executive search firm to quietly begin succession planning, according to sources familiar with the matter. It remains unclear whether Musk was informed of this effort—despite still holding a seat on the board—or if his renewed promises to refocus have altered the course of that search.

A must for Musk

Musk’s detachment comes at the worst possible moment for Tesla. The company has endured its first full-year sales decline in more than a decade, ceding EV market share globally.

In China, Tesla has lost ground to domestic powerhouse BYD, while in the US, consumer sentiment has soured amid Musk’s overt political affiliations.

Meanwhile, Tesla’s long-hyped Cybertruck launch has turned into a public relations quagmire. Initially unveiled in 2019 with promises of bulletproof exteriors and affordability, the truck didn’t ship until late 2023 at a starting price of nearly $100,000—more than double what was originally promised. The vehicle has already faced eight recalls, including safety-critical issues like faulty accelerator pedals. Tesla sold just 39,000 Cybertrucks in the US in its first full year, well below Musk’s target of 250,000 annual units.

One senior Tesla executive, Eliah Gilfenbaum, reportedly told his team Tesla would be “better off” if Musk resigned. After those remarks became public, Gilfenbaum was forced out of the company.

Chief compensation

Adding to the dysfunction is Tesla’s ongoing CEO compensation controversy. Musk, who owns roughly 13% of Tesla, has complained that he has worked without pay for the past seven years. His previously approved $56 billion pay package was struck down earlier this year by a Delaware judge, prompting the board to form a special committee to revisit his compensation.

The optics of Musk pouring over $250 million into Trump’s re-election campaign—while also seeking financial redress from Tesla—have not gone unnoticed.

In what could be described as an identity crisis, the company is pivoting hard toward robotics and autonomous vehicles, with Musk positing that AI-powered products like the Optimus humanoid robot could turn Tesla into a $30 trillion company.

But that vision rings hollow while its core EV business stagnates. Tesla’s upcoming “Cybercab” robotaxi service, expected to debut in Austin by June, has yet to prove it can compete with rivals like Alphabet’s Waymo or Amazon’s Zoox—firms with deeper AI bench strength and more regulatory wins.

Devaluation

Tesla’s market capitalization, which briefly soared to $1.5 trillion in December 2024 after Trump’s win, has since plunged to around $900 billion—$600 billion evaporated in less than five months.

One Tesla board member admitted privately that Musk sometimes joins meetings unprepared and has to be briefed extensively about ongoing company issues. Although the board maintains that Musk’s political ties may offer long-term advantages, current performance metrics suggest otherwise.

Tesla has yet to deliver a new, affordable EV model—a key market need—choosing instead to slightly refresh existing vehicles and trim costs by removing expensive materials. A lower-cost Cybertruck was announced in April at $69,990, still a far cry from the sub-$40,000 price tag once promised.

Musk’s decades-long stewardship of Tesla ushered in the electric vehicle revolution and transformed global auto markets. But today, that legacy hangs in the balance.

Information for this story was found via The Wall Street Journal, BBC, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.