Tesla’s $1 Trillion Bet on Elon Musk

Introduction

Tesla’s Board submitted on September 5, a filing to the U.S. Securities and Exchange Commission (SEC), presenting what could become the largest executive compensation plan in history, a potential $1 trillion pay package for Elon Musk, CEO of Tesla.

The plan was introduced by Tesla’s Board, developed by the Compensation Committee, chaired by Ira Ehrenpreis, with the support of Robyn Denholm, the Chair of the Board.

According to them, the plan was designed to retain Musk as CEO for at least another decade and to reward only extraordinary results, such as a massive increase in Tesla’s market capitalization and the company’s expansion into artificial intelligence and robotics. Washingtonpost , TheGuardian

This SEC filing ensures transparency and fairness for shareholders, allowing investors to review all the details, confirming that no key informations is hidden, and making an informed decision when voting.

The proposal was presented to shareholders for approval during Tesla’s Annual General Meeting on November 6.

That Thursday at 3:00 p.m Central Time in Austin, Texas (10:00 p.m in Geneva), more than 75% of Tesla’s Board members voted in favor of the plan. CNN

In its submission to the SEC, Tesla’s Board wrote:

“While we believe Elon is the only person capable of leading Tesla at this critical inflection point, changing the world is neither an overnight process nor the work of a single person.”

This sentence reflects the Board’s strong confidence in Musk and its attempt to present the $1 trillion compensation plan as a long-term strategic initiative rather than a personal reward. Tesla, Inc. Preliminary Proxy Statement (Schedule 14A)

Official Proposal and Plan Details

The plan was officially proposed on Friday, September 5.

Under this unprecedented scheme, Elon Musk could earn up to $1 trillion if he manages to grow Tesla’s market capitalization from about  $1.1 trillion to $8.5 trillion, while achieving a series of operational milestones.

Not a single euro will leave Tesla to go to Elon, his compensation will be entirely in the form of stock awards.

In total, Elon Musk could receive up to 423,743,904 shares Tesla shares, representing about 12% of the company’s total shares, given that there are 3.2 billion shares outstanding.

These shares will be unlocked gradually, in tranches of around 35 million shares each. Tesla, Inc. Preliminary Proxy Statement (Schedule 14A)

Conditions for Each Tranche

There are 12 milestones that Elon Musk must reach.

Each one unlocks only if two conditions are met:

1) A market value milestones

2) The achievement of a certain number of operational milestones.

To reach the first tier, and obtain 1% of Tesla’s total shares, Elon Musk must raise Tesla’s market capitalization to $2 trillion, and achieve at least one of the 12 operational milestones shown below.

Starting from the 11th and 12th tiers, the market capitalization target increases by $1 trillion per tier. 

There is also an additional condition saying that Elon Musk must have negotiated his succession with the Board, ensuring a leadership transition plan for Tesla’s future.

Duration and Vesting Conditions

This compensation plan is valid for 10 years, from September 3, 2025, to September 3, 2035.

Each time Elon Musk completes a tier, he will be granted approximately 35 million shares (35,311,992 to be exact). 

However, he will only receive them after 7.5 years, if he leaves the company before that period, he forfeits the shares.

The plan is therefore also designed to retain him at Tesla for at least 7.5 years. 

Furthermore, once the shares are granted, he cannot sell them for 5 years, in order to avoid a potential drop in Tesla’s stock price. SeekingAlpha

Operational Milestones 

There are 12 operational objectives in total: 

• 4 related to products
• 8 related to profitability

Products Objectives: 

1) Deliver 20 million vehicles.

This is maybe one of the easiest goals. To date, Tesla has already delivered over eight million vehicles (according to the Board of Directors report), leaving about twelve million still to be produced.

Given that in 2024 Tesla delivered roughly 1.79 million units, reaching this target over the next 10 years appears relatively attainable, requiring an average of about 1.2 million vehicles annually. CNEVPOST

2) Reach 10 million Full Self-Driving (FSD) subscriptions.

The FSD feature,  Tesla’s advanced driver assistance and near-autonomous driving system currently costs between $100 and $200 per month.

At present, only a few hundred thousand customers subscribed to it, so reaching 10 million will be a significant challenge.

3) Deploy 1 million AI-powered robots.

This mainly refers to the Optimus humanoid models, but it could include other types of robot using artificial intelligence.

4) Have 1 million robotaxis in operation.

As present, there are only a few dozen operating in Texas, which means reaching this milestone will require a massive scale-up. (Reuters)

Profitability Objectives: 

Tesla’s profitability objectives are linked to specific EBITDA thresholds (Earnings Before Interest, Taxes, Depreciation, and Amortization).

The first target is set at $50 billion in EBITDA, compared with roughly $11 billion today.

This first level should be easily achievable, especially with the growth of Tesla’s energy division and megacap projects.

The second milestone also seems reachable, but the higher targets will prove far more challenging.

However, Elon’s goal is clearly to hit all twelve milestones, just as he did in his previous compensation plan, where the final market capitalization target was $650 billion, yet Tesla ultimately reached $1.1 trillion.

In an exceptionally favorable scenario, all twelve could once again be achieved.

Potential Ownership Impact:

Elon Musk currently holds approximately 410 million shares of Tesla, representing around 12% of the company’s total outstanding shares of 3.33 billions. (Nasdaq , YahooFinance)

Under the proposal plan, if he achieves all 12 performance milestones, meaning the company reaches a market capitalization of $8.5 trillion, then Elon Musk could receive up to 423.7 million additional shares (roughly 12% of Tesla’s current share count).

Since these would be newly issued shares, his stake would increase to about 22 % of Tesla’s total stock following full vesting, assuming no significant dilution or share buybacks. SEC

This would bring his total holdings to approximately 833 million shares, up from the current 410 million, if all 12 performance milestones are achieved.

Tesla’s Strategic Announcements

Since the Board approval, Tesla has made a series of major strategic announcements.

At a press conference in Austin, Texas, on November 7, Elon Musk announced Tesla’s intention to construct a massive semiconductor factory, known as the “Terafab”, which will focus on producing the company’s next-generation AI chips. Large-scale production is projected to start around 2027.

Musk also mentioned a potential collaboration with Intel Corporation for the project but no formal deal has been reached yet.

According to Reuters (November 7, 2025), Tesla’s objective with the Terafab project is to strengthen its control over hardware–software integration, particularly in chips, AI, and robotics, while reducing production costs. 

Musk added that Tesla’s in-house chip design could consume about one-third of the power required by competing chips, positioning the company as a broader AI and robotics innovator, beyond its automotive roots. Reuters