Musk’s New Tesla Pay Package Seems to be Aimed at Mars

Elon Musk (Credit: SpaceX)

by Douglas Messier
Managing Editor

Elon Musk has a new pay package with Tesla Motors that could net him $55 billion over the next decade if the company reaches a series of extremely ambitious targets, according to press reports. If he doesn’t reach those goals in 10 years, he could end up with nothing.

That might seem like a crazy plan even for Musk, who is known for taking great risks. But, it makes sense when you consider the billionaire’s ultimate long-term goal: to develop a transportation system to facilitate the establishment of human colonies on Mars.

Musk has said he is dedicating his personal wealth to that objective. And although his net worth is estimated at $21 billion, actual profits from his various businesses have been elusive.

Tesla Motors has lost billions of dollars, is deeply in debt, and has rarely shown a profitable quarter. It’s sky high stock price is predicated on future earnings. Tesla’s acquisition SolarCity was either a “no brainer” (Musk) that created synergies between the two companies, or a terrible acquisition (critics) of a money-losing company that did little more than bail out Musk and his two cousins, Lyndon and Peter Rive, while adding billions in debt to the car company.

SpaceX is a private company that does not release financial information. However, officials have said that the investment in developing reusable rockets totaled about $1 billion. That figure apparently does not include the company’s investment in the Falcon Heavy or a new launch complex in Texas. A report in  The Wall Street Journal cited internal financial records showing SpaceX lost $260 million in 2015.

Meanwhile, Musk’s efforts to interest governments in his Mars plans as part of a public-private partnership have apparently come up short. Despite making two widely publicized presentations outlining his plans, the reaction from the world’s leading space powers has been a collective shrug.

The U.S. government under President Donald Trump is focusing NASA on returning astronauts to the moon. Every other major space agency seems focused on the moon as well. The only government that seems somewhat interested on Mars is the United Arab Emirates, but there’s no evidence thus far that it is willing to help fund Musk’s plan.

So, the Tesla compensation deal is likely a big throw of the dice, betting that he can meet the targets. With $55 billion he would be able to fully fund his Mars plan. In the meantime, he will continue to work on the big rocket he needs to get people there with whatever profits he has from his companies.

  • I can see the logic here but I think that there is another possible explanation. IIRC, in their FCC? filings, SpaceX indicated that they would be making tens of billions per year with their satellite constellation company in Seattle. With control of the cheapest rocket, it seems to me likely that they could put up a better constellation more cheaply than any competitor. Getting monthly payments from many customers seems to me that the tens of billions per year is a reasonable prediction. So my point is that I think that he already has a clear path to funding Mars.

    As for Tesla, the company needs money now otherwise it could die. So, Elon is saying that he will forgo taking money now in exchange for taking more of it later but only if the company survives. If it does then it will probably be big enough to afford to pay back Elon his delayed earnings.

  • Enrique Moreno

    I think that Musk is not taking into account one future fact: He will be older. I am three years older than musk, a small entrepreneur and I feel more old every year and I cannot accomplish some objetives that were possible for me ten years ago. I have a healthy way of life, but…

  • Xentry

    Elon has two companies. One (Tesla) is clearly a money pit as of today for a number of different reasons (one of which isn’t that their products are a failure), and the other one (SpaceX) is a private company. Having said this, it’s a little bit dishonest to claim that SpaceX lost $260 million in 2015 while failing to point out that 1) they didn’t launch any Falcon 9 for almost half a year following the loss of CRS-7 – and let’s stipulate that it may have had something to do with the purported loss -, and 2) the same WSJ source shows they have been otherwise profitable (if marginally) for several years already.
    From all credible accounts, SpaceX is profitable even when it’s constantly investing incredible amounts of money in disruptive technologies that are apparently already starting to pay off (namely, reusability). When (if ever?) there’s proof SpaceX wasn’t profitable in 2017 (after launching 18 times), I’m sure it’ll probably register as more relevant news than this.

  • Douglas Messier

    Tesla was on paying him minimum wage as CEO. Hardly a drain on cash flow.

    Do you really believe Musk’s claims on satellite Internet revenues? They might embody Musk’s perpetual optimism that is often not grounded in reality. Even if that happens it will take anything while to build up to it.

  • Michael Halpern

    Similarly it’s dishonest to say that Tesla is loosing money, not really, big capital investment into their production that looks to pay off soon

  • Xentry

    Agreed. This is why I said Tesla’s a money pit – there’s a lot of money that is going in and probably won’t return to investor’s pockets in a long time, simply because they’re investing on such a large scale (machinery for Model 3, the supercharger network, the Gigafactory). Nothing to do with bad products, which would be a telltale sign of an actual failing company as opposed to an exponentially growing one.

  • Michael Halpern

    Yup they make products people want, and not just because they are electric, but because of quality and preformance

  • Douglas Messier

    I should have mentioned the launch failure in 2015. Even so, they were bedeviled by other serious problems during that same period.

    SpaceX’s attempt to get to a monthly launch cadence in 2014 was ruined by helium leaks as they switched to tanks in house. The managed six launches that year.

    Then came 2015 with seven launches because of the launch failure due to a strut breaking on a helium tank. That was SpaceX’s probable cause; the NASA investigation didn’t find a single probable cause but multiple likely ones..

    They finally hit a monthly launch cadence for the first eight months of 2017 then blew up a Falcon 9 while fueling it when a helium tank blew. Finished the year with eight launches.

    They’ve done great innovations in recovering the first stage. But, one wonders if all the attention focused on that resulted in less attention and money dealing with the problems in the second stage.

  • ThomasLMatula

    The real challenge he has with the satellite Internet is that 95% of economic activity takes place on 5% of the Earth’s surface and he will need to be competitive in that 5% if it’s going be successful. A complicating factor is that probably 2% of that area is controlled by nations that won’t allow access to the Internet without being to censor it. Expect them to try to block it at the ITU or jam it over their boundaries. That said, if he is able to build the right business model for it, it could have the same impact on global communication as the Internet itself had.

  • Douglas Messier

    It’s not dishonest. It’s a fact. It’s reported every quarter in their profits and loss statements.

  • Michael Halpern

    I consider CapX as separate.

  • Xentry

    I agree it’s relevant to point out the difficulties in development that SpaceX has had, especially with the second stage which does appear to be their weakness. But to claim anything other than Falcon 9 being a huge commercial success for the US rocket industry, especially given the combination of low cost, low risk perception (Falcon 9 appears to have insurance costs similar to Ariane 5), and the sheer number of customers, is a really hard sell these days, even if we discount their technical achievements in reusability.
    Again, I’d love to see their figures for 2017…

  • Douglas Messier

    Nobody SpaceX wasn’t a success. The point is it hasn’t generated a whole lot of money for Musk’s Mars mission. At least note yet.

  • Xentry

    SpaceX’s string of successful missions in 2017 (the first year in which they’ve been able to hit a good launch cadence) likely translated to quite a bit of cash. We just don’t know how much it was, how much a “whole lot of money to start funding Mars missions” is, and how the two numbers compare, in order to assess whether they’re in the right path.
    In any case, Tesla’s compensation plan, SpaceX Starlink’s business plan, Block 5’s reusability targets, and BFR/BFS’s timeline all point to Elon Musk being quite far from satisfied as of today. Good.

  • Hypx

    CapEX is not considered part of quarterly profits or losses, but rather accounted for in cash flow. Since Tesla has both negative operating cash flow and quarter losses, it’s fair to say they really do lose money.

  • Douglas Messier

    The BFR and the satellite constellation are going to be money pits and eat up all profits from SpaceX for some time until they start bringing in any revenues.

  • Mr Snarky Answer

    The Hunt for Red October has you covered:

    Ramius: Upon reaching the New World, Cortez burned his ships; as a result his men were well motivated.

  • Not Invented Here

    Kind of misleading to classify this as a big throw of the dice without mentioning Elon signed up a similar incentive package in 2012, and as of today he accomplished 10 out of 10 market cap milestones and 9 out of 10 operational milestones from the old package. So yeah it is a throw of the dice as anything in the market, but he’s pretty good at getting the number he needs.

    Also even if he didn’t reached any of the goals (there’re 12 in total, each can be paid out separately), he wouldn’t end up with nothing, he would still have his current shares in Tesla stock.

  • Not Invented Here

    The incentive plan is not something new, there was one signed in 2012, and Elon has accomplished nearly all of its milestones, so Tesla needed to come up with a new plan. Mars may be a consideration, but it won’t be the only reason, Elon has been operating under similar incentive plan in the past 5 years.

  • Kenneth_Brown

    There have been certain statements made about Elon’s zero salary performance based package, but the devil is in the details. There can be much more to executive compensation than stock bonuses and salary. The company could be paying for all of his living expenses and just calling that a “stipend” or some other word except “salary”. It would be very interesting to see the official signed document. It should be assumed that the agreement was drafted by Elon and presented to the board rather than the other way around. He’s not much of an engineer (BSc in Phyisics, which is not engineering, it’s science) but he is very good at PR.

    Elon is also not a Billionaire. His net worth is in stock primarily between Tesla and SpaceX. If he were to start cashing out his shares, the price could drop precipitously which means his net worth drops like a rock as well. The SEC requires major executive stockholders to file a notice with the SEC when they want to sell over a certain percentage of their holdings. It all makes for a very odd position of both being a billionaire, but not really being a billionaire.

    Tesla’s products are good, but I wouldn’t call them great. They still can’t get body panels or trim all lined up correctly. They are a nightmare to get serviced and a fender bender can be so expensive to repair that insurance companies total them more often than not. If a car is given “salvage” title, Tesla disowns the the car and will not provide any support no matter how well they are rebuilt. The company as a whole has been hemorrhaging money for years and with the acquisition of Solar City it has over $10 billion in debt. To be fair, some of that debt is offset by leased solar systems, but it’s still listed under liabilities. Tesla has also taken loans from SpaceX and that puts SpaceX at some risk if Tesla fails completely or has to reorganize under Chapter 11 bankruptcy. SpaceX won’t get a priority on repayment just because the companies are incestuously related.

    Of the many challenges facing Tesla, two of the are increased competition in the EV market and loss of Carbon Credit income. The last major auto shows in Detroit and Tokyo had many EV introductions both of concepts and models scheduled for production in the next 2 years. So far, Tesla has only had the Chevy Bolt to compete with in the long range EV market space. Nissan has upgraded the Leaf for 2018 with longer range capability and has said they plan to have a 250 mile range Leaf in 2019. Companies that have been purchasing Carbon Credits from Tesla such as GM and Ford won’t need them which will put a dent on what was essentially free income for Tesla. That income was a fair pile and is a big reason they had one profitable quarter in recent years.

    Even Asia is going to EV’s. Singapore is mandating that the ubiquitous Tuk Tuk has to be electric within the next 5 years. Electric versions are on the road now and cost less to buy and run than the gas version. China has at least 4 domestic EV manufacturers with BYD being one of the largest. People will still buy a Tesla in China the same way that Porsche’s sell in the US, but the domestic versions will crowd out the Model 3 even if Tesla can satisfy their remaining reservation holders in less than 2 years. Even though Elon said that he learned his lesson with gizmo overload on the X, the Model 3 is still filled with useless gadgets like a motorized remote controlled charge port door. That just adds cost to the vehicle without adding value and price in China will be a bigger factor than it is in the US.

    Mars? There is no commercial reason to put humans on Mars. For the price of sending meatware, Earth could send many many robots to do science. There isn’t anything known on Mars that’s worth shipping back to Earth other than for scientific analysis and no manufacturing process that could add enough value to make just the return trip worthwhile. If nuclear propulsion is ever put back into development, Mars could be a realistic destination, but currently it takes so long to get there that it isn’t feasible to send people, even dirty politicians (in one piece). If Elon wants to do it and his investors are willing to risk all of their money too, that’s one thing, but it’s not a good use of tax payer money when NASA is having to cut Earth Science missions to pay for a rocket to nowhere (SLS).

    All of Elon’s “great ideas” are not original. The Hyperloop was put forward over 100 years ago and it still highly unlikely to work and if it does, will be expensive to keep operational. NASA and the USSR were landing rockets in the sixties and seventies on other planets as well as Earth. Baker was building electric cars at least as early as 1903. Several companies have gone bust with solar roof tiles. Siemens, Bosch, LG and BYD were making backup battery systems long before the PowerWall. There is a reason why subway tunnels are 2x the diameter that Elon wants to bore. The biggest one is people-miles per time unit. Even more of his genius ideas come from decades old science fiction written by authors such as Robert Heinlein who stole them from others and just filed off the serials numbers before using them in fictional stories.

    I have to wonder what isn’t being reported in the philanthropic new payment package. The guy has 5 kids and one (or is it two) ex wife(ves) and doesn’t sleep rough in front of a store at night. I have to assume he bathes regularly even if he doesn’t stand close enough to his razor and really should. He has to have some sort of income beyond having his bills taken care of by the company. Is this a mid-term butter up before the Tesla 4Q2017 numbers are made public on 2/7 to keep the stock price going up? Will there be another product announcement on 2/10 to shift the press off of the financials as quickly as possible? I wouldn’t be surprised to see reports of a groundbreaking ceremony for the manufacturing location of the Semi truck that doesn’t have a chance of being ready for release in 2019 with any sort of pre-production testing.

  • windbourne

    Tesla does NOT need MORE money now. They have enough and as long as they hit 5000 cars / week by end of year, they will be profitable. And that does not even include the solar portion, which is expected to be profitable as well.

    Personally, I agree with Doug that Musk is taking money delayed so that he can fund Mars himself. That will take a lot of money and the first 4-6 trips will be DICEY. 2 of those will be cargo and set-up, followed by 2-4 manned flights of which I fully expect some deaths.

    That is why gov, except for Russia, China, North Korea, etc are NOT afraid to send ppl there.

  • windbourne

    Bingo.
    Another winner here.

    I really do not think that BFR will eat that much once he is launching. But both require manufacturing lines will take some time and be expensive.

    I will say that I believe that the sat manufacturing line will do more than just the constellation, but will actually be used for making regular sats at a fraction of the price. The 7000+ sats for the constellation is a way to get the line going and making things dirt cheap.

    Once those sats are cheap, they will take business away from pretty much everybody and will likely build constellations around the moon and mars.

  • windbourne

    Musk has overall done a good job keeping to deliveries, and even $. What he does not do well, is timelines, as well as not telling where he is investing $ into. For example, if Tesla was not developing Supercharger network in America, Europe, AND China, they would be very profitable.
    I’m not convinced that moving to dealer approach would make them profitable as others claim. I think it would eat into margins.
    But, even the money on buying robotic companies kills their profits. Yet, in.the coming year, they should look like Amazon today.

  • windbourne

    Nice thing about SATs is that nations can not control it when antennas are small. Dish/direct have a number of customers in.china, Iran.

  • windbourne

    In 10 years, if he does same deal, I would agree with you. But right now, he should be ok. Besides, once M3 is up to speed, and MY started, he will probably cut his hours way back and let others manage it similar to what SX is.

  • windbourne

    Yes, in the same way that Amazon did for a decade.

  • windbourne

    So many things wrong here or just BS.
    So, not a billionaire because his money is in stock. If you accept that, then there are probably 1% of today’s listed billionaires because all of them have money tied up in stock.
    Body panels/trim on S/X are great, and at this time, the 3 is supposed to also be high quality.
    Service by Tesla blows the door off Mercedes, Audi, Honda, and Toyota dealership in Colorado. I know this because my wife had these cars new and will not go back to them. Her MS has had minor issues that Tesla fixed with no charges. And as to salvage, lots of dealers do not touch salvaged cars.

    Few Tesla have been totaled except in the early days of MS ( difficult to get parts then ). Now that f[123]50 trucks are making heavy of aluminum, repair costs will drop. At same time, Tesla is now doing their own metal work repair.

    Carbon credit is a big source? As of end of 2016, Tesla has gained a cumulative 140 million over 10 years. Iow about 14 million / year. Drop in the bucket.
    Competition?
    The model S outsells all EVs in America.
    With just sales in America and half of Europe, they are 3 in total sales. This is just the MS.
    Once M3 hits 5000 cars /week, they will be largest selling in the world. Competition? MS, MX, and M3 are considered high end cars, not expensive cheap junk like leaf, bolt, Chinese EVs etc.

    I will not even bother with the rest of your BS esp dealing with mars. It is obvious that you are simply here to troll. Just have to say, that I’m glad you are shorting Tesla.

  • Michael Halpern

    Well I wouldn’t say they would replace all satellites, but for instance what you could do is have a small satellite with some sort of high definition sensor with a smaller lower end antenna mainly for tracking and having most of the communications going through laser communications through Starlink, and getting the data to the ground that way

  • windbourne

    Ah. No, what I’m suggesting is that musk’s SATs will cost a fraction of everybody else, just due to building 7000 over 2-4 years.
    Just as SX has thrown launch industry into turmoil, SX will throw sat building industry into even more.
    These ..1-5B SATs are likely a thing of the past, except for highly specialized intelligence/military SATs.

  • ThomasLMatula

    True, as long as you are able to hide it from the law, you will have access.

    https://www.csmonitor.com/World/Global-News/2016/0725/Why-did-Iran-destroy-100-000-satellite-dishes

    Why did Iran destroy 100,000 satellite dishes?

    By Aidan Quigley, Staff
    July 25, 2016

    “All television broadcasting in Iran is controlled by the state, as PBS reported. However, 70 percent of Iranians violate the law and own satellite dishes which can gather television programming worldwide, as Culture Minister Ali Jannati told Al Jazeera.”

    In response, the Iranian government conducts occasional raids, and frequently jams satellite signals.”

  • Tom Billings

    All too true, Thomas. However, as the transmission power of LEO comsats goes up, the size of ground antennas goes down. I will be very interested in the size of the ground antennas needed to get full use out of these 7,000 birds. In fact, I expect that to be the major competitive point between different constellations. When it gets to the level of the Gigabytes per second that can be transmitted per square centimeter of ground antenna, no one will be able to censor that well.

    That is one of the nice things about BFR/BFS coming along, in that putting up sats with the power to burn through jamming of ground antennas the size of a cell phone will become economically possible. At some point certain statist oligarchs are going to have to adapt to that environment, or go to war to stop it. I don’t see them going to war over it.

    The major opposition you did *not* mention is our own ISP oligopolists. Comcast, as an instance, has great reason to keep this scheme from bearing fruit, with agreements all the way down to the level of my apartment’s owner, who bans any service but Comcast from his buildings, in return, I assume, for a slight payment to himself per guaranteed customer. They will not give up easily.

  • Michael Halpern

    The sat industry seems pretty adaptive, so they will survive

  • windbourne

    I’m a fan of not requiring NN in the states, but in.return, Congress should disallow any and all comm monopolies , as well as require that no law can bar community networks.

    With that approach, telcos and cable would quickly change their tunes.

  • MzUnGu

    The payoff is 10 year from now. how you link that to his Mars plan?

    Took 16 years for SpaceX to get here building a somewhat commodity “rocket”, going to Mars relies on some seriously new tech easily cost 50X as much and surely few more decades if at all.

  • MzUnGu

    Yes they do…. Just now.

    Tesla plugs into securitisation market for new funds
    https://www.ft.com/content/c8cc4704-02c9-11e8-9650-9c0ad2d7c5b5

  • JS Initials

    The question is: do people want to buy Tesla cars? Do you? I don’t.

  • windbourne

    We own a 2013 model S. Best car we have owned, along with best service. It puts Mercedes, Audi, Toyota and Honda to shame.
    Tesla can not produce enough cars to meet demand. 2 years ago, when they opened up M3 for ordering, they got 450k orders in a short time. No other car has ever had that demand and esp on.from America, Europe, and China. Iow only about 1/3 of the population had the ability to order, in contrast to any of the majors, in which 90% can order.

    WRT Ken browns assault on musk, there are plenty of things that musk does wrong that he could go after him about. Absolutely no reason to repeat the made-up lies about him, as well as create more.

  • windbourne

    Not able to see that one. Still, I will take your word for it.

  • ThomasLMatula

    Teslarati is reporting Feb. 6 as the launch date for FH. That is good as the CR runs out Feb. 8.

  • ThomasLMatula

    What would be great is if they could provide high speed WiFi straight to a standard smart phone or laptop. If they are able to do that for a few dollars a device a month it is game over for the telecons and basically the end of national censorship by shutting the Internet down.

  • Tom Billings

    Kenneth Brown said:

    “There isn’t anything known on Mars that’s worth shipping back to Earth
    other than for scientific analysis and no manufacturing process that
    could add enough value to make just the return trip worthwhile.”

    This dead horse is long since beaten to hamburger. *Every* significant space settlement advocate points out that the reason transport costs must be driven so low is that it is settlers who will pay. This is *not* settlement by imperial economics, where an imperial center spends resources to go out to a peripheral area, in order to bring back to the center something that can be used there. The imperial model is the model for the settling of Latin America. It is *not* the model for the settling of North America.

    Successful settling of North America was driven by settlers who paid their own way. Their settlement was driven by their desire to leave Europe behind more than by what they expected to get here. That is what will drive settlement throughout the Solar System.The wealth and the mines and the factories sending stuff elsewhere came later, from people free to participate in the networks of industrial society around the world. The most valuable thing they found was freedom. That sort of settler’s economics is the way it will work in Space, or settlement will not happen.