Tesla CEO Elon Musk has crossed swords with Norway’s sovereign wealth fund over his pay package, which sets new highs at $56 billion. The fund, which is headed up by Nikolai Tangen and is frankly one of the most influential institutional investors in the world, twice voted against the pay deal.
Norges Investment Bank manages the country’s sovereign wealth fund and holds almost 1% of Tesla stock NASDAQ:TSLA. It stood against Musk’s pay package in 2018 and voted against it again last year, thereby incurring Musk’s wrath. NBIM feels the pay deal is too much, even for Elon, and says the terms risk diluting other shareholders.
Advisory firms are also starting to turn against Musk, advising shareholders to vote against his huge compensation packages.
Musk in turn has responded with characteristic verve, with his infamous text message to Tangen, turning down an invitation to attend a high profile Oslo dinner with other CEOs:
“When I ask you for a favor, which I very rarely do, and you decline, then you should not ask me for one until you’ve done something above nothing to make amends. Friends are as friends do.”
The message was obtained by the Norwegian press under freedom-of-information laws in Norway. While it points to an increasing rift between Tesla and NBIM, it could have more severe repercussions for Tesla shareholders. We spoke to a couple of European professional investors to get their thoughts on how this is going to play out for Musk.
- Companies Reporting: Fevertree, Vistry, Next
- Spectre of the bond market stalks Reeves’ Spring Statement
- Tesla stock is facing a make or break year in 2025
NBIM is highly regarded by European investors
The problem Tesla could have is the relatively high level of influence the likes of NBIM and indeed shareholder advisory firms like Glass Lewis exercise with other institutional investors. NBIM in particular is highly regarded by European investors who own Tesla stock.
“The real effect is the crowd effect,” said one corporate advisor in Switzerland we consulted. “If [NBIM] leave, others will have to ask ethical questions also.”
A seasoned Nordic stock investor we spoke to commented further:
“I do not think it is big enough alone, but the recent behaviour of Elon Musk will drive certain institutional investors away. Tesla has had weaker than expected earnings. I think the recent Tesla rallies have been driven more by expectations of what [Musk] can achieve with Trump.”
This goes beyond just Musk’s offensive management of important Tesla shareholders and public perception – his close alignment with the Trump administration and right wing groups in the US can easily work against him and hit sales of Tesla cars outside North America. Tesla’s share price has been driven on the assumption that the company can continue to capitalise on relatively unlimited access to international auto markets (i.e. without tariffs) and that the brand will still be held in high regard with consumers. That seems to be changing under Trump, regardless of what Musk does next.
Are consumers in Europe turning against Tesla?
Aside from Musk’s disagreements with NBIM, Tesla is also struggling in Scandinavian markets. Registrations for Tesla cars are down 44% year-on-year in Sweden and Norwegian registrations are down 38% year-on-year. Market research is showing that Tesla’s image has been damaged by the spat in Scandinavian markets at least. This is at a time when overall car registrations in both Sweden and Norway are up.
The share of Swedes who have a positive opinion of Tesla has declined 11% according to a poll organised by Novus, a Swedish market research group. This stood at 19% when Donald Trump was inaugurated. We anticipate the Norwegian picture won’t look much better!
This is not a good time for Musk to be picking fights with his largest shareholder. Tesla has been forced out of pole position in the global electric vehicle market by China’s BYD, a manoeuvre that had been predicted as soon as the Chinese automaker released its latest set of storming sales numbers.
As BYD has accelerated into the fast lane, it provides fresh evidence of just how competitive the EV market has become and how hard it will be for Tesla to swerve back to head the pack. Even though Tesla’s sales reached a record level and exceeded expectations in Q4, it wasn’t enough to fend off the competition from its Chinese rival. BYD used to claim it was the biggest brand we’ve never heard of, but it’s a household name in China, and is one to be watched as EV sales ramp up around the world.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, had this to say:
It was already getting tougher for Tesla in China before the latest price war took hold. Tesla had reduced costs of popular models to increase sales but was hit by a storm of competition as BYD unveiled a super-aggressive pricing campaign at the end of the year. The fight will hurt margins for both companies, but BYD clearly believes it’s a price worth paying to increase market share and recognition.
Demand for electric vehicles has also been dented due to high-interest rates, elevated inflation, price premiums, range anxiety and other factors.
Tesla tried to address these issues with a series of price cuts, but that hurt its profitability and the firm’s operating margin fell below 10% in 2023. Furthermore, executives warned of a slowdown in volumes in 2024, while Q1 deliveries plunged around 20% over the previous quarter and below the 400K threshold for the first time in over a year.
Can Tesla make it back, though?
Tesla has been refreshing its line-up, with the updated Model 3 and the futuristic Cybertruck. An upgraded version of the Model Y also appears to be in the works, which was the best-selling car globally last year. More importantly, the company plans a cheap EV at the $25,000 price point, which will be crucial for mass adoption. However, this will need some time, as Musk expects production to begin “sometime in the second half” of 2025.
Tesla’s autonomous driving and AI progress are also going to be critical for its future, as they can unlock tremendous value. Musk has made bold claims and also wants to license the technology to other companies. However, true self-driving and relevant regulatory approvals are not here yet. This is the proverbial white rabbit that Musk needs to pull out of the hat if he is going to keep his European institutional investors on board.
Much is going to depend on how Musk behaves this year: regardless of the relative value of Tesla the company, if consumers turn against its brand, Tesla could end up in deep trouble. Consumer boycotts can crush the revenues of even the biggest companies. And Trump’s trade wars are unlikely to help either.
