Tesla is in crisis mode, and it’s all down to how the company is governed. Stakeholders simply don’t have the confidence that the company can excel under its current leadership. This is according to Corporate Governance Institute, the global leader in educating and certifying existing and aspiring boardroom directors

Ciaran Bollard, CEO, Corporate Governance Institute, comments: “As of early April 2025, the company’s share price has been struggling. Every cent of the bump it enjoyed following Trump’s election victory and Elon Musk’s appointment as an employee of the US Federal Government is gone. Analysts don’t expect this good fortune to return anytime soon.

“Since January 2025, Tesla’s share price has been in freefall. It has lost over half its value from a December 2024 peak.”

It coincides with three big trends:

• CEO Elon Musk’s role as head of the Department of Government Efficiency (DOGE).

• Tesla’s increased global competition. It has been a world leader in electric vehicles for years, but now, other companies are challenging its dominance.

• The increasing distance between the ideology of Tesla’s customer base and that of Musk himself.

“The real issue isn’t that Musk is taking on new responsibilities elsewhere; it’s how he is (or isn’t) handling Tesla while doing so. The company faces plummeting sales, eroding consumer confidence, and growing stakeholder dissatisfaction. Yet, Musk’s response has been erratic at best and negligent at worst,” added Bollard.

“Musk has always been outspoken, but in the last few years, he has gravitated far more towards far-right politics and found a home in the warm embrace of the MAGA movement in the United States. Tesla is in a bind because of this; its consumer base – ever environmentally conscious – traditionally aligns with the opposite end of the political spectrum.”

It’s Musk’s political decision to take on the roles he wants. Still, whether he likes it or not, he has tied Tesla’s reputation to his own, meaning stakeholders will judge the company based on his actions while working for Donald Trump.

The most crucial fact is that Tesla sales are dropping because of this.

Bollard continued: “Musk’s governance failure here is that he is still supposed to act in the company’s best interests while he remains the leader. If his current political position compromises trust, he should either re-think his politics or distance himself from Tesla’s operations, but he has shown no sign of doing either.”

Tesla is therefore facing a number of inter-related challenges:

1 - A Divisive Leadership Style That Alienates Customers And Investors

Mainly because women and minorities are underrepresented in the top ranks of U.S. firms, there is very little racial and gender diversity in corporate America.

Investors want to see more diverse boards, boards that represent the communities and customers they serve. Many companies currently don’t reveal the gender and race, or ethnicity of directors.

2 - Plummeting Sales And No Clear Response

Musk hyped up the company’s cybertruck, but when it finally hit the market, it arrived late, overpriced, and riddled with production issues. Meanwhile, competitors like Rivian and Ford have surged ahead.

Competitors are now caught up in the electric vehicle game, giving customers cheaper alternatives to Tesla while still providing them with the same luxuries.

Tesla is having serious trouble in the Chinese market, where other brands like BYD are eating into the company’s market share, offering better value and fewer controversies.

Bollard added: “Despite all this, Musk’s response has been minimal, and that’s the governance flaw. When sales are down, when the pressure is up, the answer is always a thorough analysis of strategy and a revamp if necessary. Get rid of what’s not working and explore new avenues for success."

“Musk is simply not doing this. There’s no clear turnaround plan, no major product announcements to reinvigorate demand, and no strategy to reassure investors, some of whom are questioning his leadership outright."

A Governance Structure Built Around One Man

Tesla is still firmly built around Elon Musk, and Musk favours the one-man-band approach to governance.

He demonstrated this at X too. Independent, inquisitive and challenging boards are one of his biggest pet peeves. Instead, he prefers governance colleagues to be more “rubber-stamp” in their behaviour, consistently agreeing with his decisions and falling in line instead of challenging anything.

While this suits him, it’s not exactly an indicator of good governance, especially now that Tesla is out of rapid growth mode and facing serious business challenges.

Bollard concluded: “There’s a lot to talk about with Elon Musk, who is now one of the most influential people in global politics, let alone economics."

However, behind all the debate and divisiveness, he also has several things to answer for at the company that he built from the ground up over the last decade: essential governance 101 issues that will decide the future of the business.

What happens next? That’s the big question.