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Tesla kicks off annual meeting, where succession, demand in focus

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© Reuters. FILE PHOTO: Tesla logo and Elon Musk silhouette are seen in this illustration taken, December 19, 2022. REUTERS/Dado Ruvic/Illustration

By Hyunjoo Jin and Tanya Jain

(Reuters) -Tesla Inc kicked off its annual meeting on Tuesday, where Chief Executive Elon Musk is expected to face investor concerns including the lack of a clear successor at the electric-vehicle maker, as well as softening demand and delays of some new models.

Investors have expressed frustration that Tesla (NASDAQ:)’s board has failed to make sure that Musk is focused on the automaker at a time when competition is rising and the economy is slow.

His commitments to other ventures such as a new AI startup remain a worry even though has Musk said he will devote more time to Tesla after announcing last week that NBCUniversal’s former advertising head, Linda Yaccarino, will succeed him as CEO of Twitter.

Musk has said he plans to focus on products and technology at the social media firm. He is also chief executive of rocket company SpaceX and runs brain-chip startup Neuralink and tunneling firm the Boring Company.

Earlier this year he registered a firm named X.AI Corp, incorporated in Nevada, and has said he will launch an artificial-intelligence platform that he calls “TruthGPT.”

“He could spend more time with X.AI Corp. He has passion about AI,” said Gene Munster, managing partner at Deepwater Asset Management.

“That’s a big X factor,” Munster said, adding it remains unclear whom Musk will hire to lead the AI startup.

Tesla shares closed flat at $166.52 on Tuesday. The stock has dropped about 60% from its record high in November 2021, hurt by Musk’s distraction with Twitter and worries about softening demand for electric cars.

Below are some topics that are likely to be discussed at Tuesday’s shareholder meeting, which is being held in Austin, Texas, and also live-streamed.

SUCCESSION

Investors will vote on a shareholder proposal for the company to publish a report on “Key-Person Risk,” reflecting concerns that the carmaker relies heavily on Musk’s leadership. The proposal seeks to identify key persons and establish succession plans.

Musk said at last year’s shareholder meeting that he will stay at the automaker as long as he is useful. In November, Tesla director James Murdoch testified in court that Musk had identified someone as a potential successor.

Tesla board members have discussed CFO Zach Kirkhorn as a possible successor as CEO, the Wall Street Journal reported last week, citing a person familiar with the matter.

BOARD NOMINEES

Investors will also vote on the appointment of Tesla co-founder and former chief technology officer JB Straubel as a board member.

Proxy advisory firm Glass Lewis has recommended that shareholders vote against his appointment, citing worries about his independence.

Straubel, who is CEO of Redwood (NYSE:) Materials, a battery recycling and materials company, is considered a potential successor to Musk, according to Deepwater’s Munster. 

Shareholders will also vote on the re-election of Musk and Chair Robyn Denholm as board members.

Proxy advisory firm ISS has recommended a vote against Denholm, citing concerns about a lack of scrutiny over the use of Tesla shares as collateral for loans by Musk and his brother, Kimbal.

DEMAND

Investors expect Musk to talk about vehicle demand against the backdrop of a slowing economy and growing competition.

Musk said in April the EV maker would prioritize sales growth ahead of profit after it missed its margin target due to aggressive price cuts.

Musk sent an email to staff on Monday that the company can make no new hires unless he personally approves them, including contractors, and asked executives to “think carefully” before submitting hiring requests.

PRODUCT PIPELINE

Tesla may need to refresh its aging product lineup to meet its ambitious sales targets.

Musk said last month he expected a delivery event for the long-delayed Cybertruck pickup trucks in the third quarter.

He had signaled strong demand for the Cybertruck, but said it would take time to get the manufacturing line going for the “very radical product.”

Investors are also awaiting details on Tesla’s less expensive electric cars.

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