Musk’s ascension in the politics hits Tesla’s prospects
Tesla experiences a decline in performance as Musk gains prominence within the Trump sphere. Few brands exhibit such a strong correlation between their public perception and the persona of their CEO as Tesla does. Throughout the majority of the electric vehicle manufacturer’s existence, this has proven beneficial for its commercial interests. Elon Musk’s commitment to diminishing global dependence on fossil fuels and his efforts to enhance the attractiveness of electric vehicles have drawn numerous consumers eager to signal their support for his ambitious vision of techno-environmentalism. With Musk’s recent alignment with Donald Trump and his immersion in the complexities of national politics, numerous Tesla owners and potential buyers are contemplating the implications of choosing to drive a Tesla in the current climate. Such uncertainties have started to manifest in concerning quantities for the firm.
Garth Ancier, a television executive based in Los Angeles, reminisced about a conversation held over a year ago with two co-owners regarding the perceptions associated with being seen in a Tesla. “They expressed, ‘I find it increasingly uncomfortable to drive this vehicle, as it resembles maneuvering a large red MAGA hat,’” Ancier remarked. Ancier is now looking to divest his four-year-old Model X. “Absent his conduct, I would likely remain loyal to a Tesla.”
Tesla, the preeminent producer of electric vehicles in the country, has consistently outperformed its competitors in terms of consumer loyalty, with surveys indicating that a significant number of owners remain committed to the brand. Recent polling indicates a decline in the brand’s appeal, while sales data reveal a corresponding financial impact. In 2022, prior to Musk’s foray into presidential politics, automotive consulting firm Strategic Vision reported that 22% of surveyed car shoppers indicated they would “definitely consider” a Tesla for their subsequent vehicle acquisition. According to Alexander Edwards, the president of the firm, this development positions Tesla alongside established luxury automotive brands like Mercedes-Benz and BMW. By the summer of last year, that percentage had decreased to 7%—approximately consistent with Lincoln and Dodge—and it has remained at that level, a significant decline that is uncommon in the automotive industry, according to Edwards.
“Currently, there are no indicators of recovery,” Edwards stated, highlighting the contradiction between Tesla’s traditional allure to environmentally conscious consumers and Musk’s conservative political stance. In December, approximately 63% of respondents indicated that they would not contemplate purchasing a Tesla, marking an increase of about 10 percentage points compared to the spring of the previous year. In the past few weeks, following Musk’s advocacy for significant reductions in the federal workforce and his support for a far-right political party in Germany, there have been protests at Tesla showrooms across the U.S. and Europe. Additionally, several Tesla stores and Supercharger stations have experienced vandalism, including the application of spray-painted swastikas.
Tesla faces obstacles that go far beyond the repercussions of Musk’s political stance. The firm’s revenue and profit margins are facing challenges due to its aging vehicle portfolio and increasing competitive pressures from rival manufacturers who are employing aggressive marketing strategies to attract consumers. The decline in quality and falling resale values have negatively impacted Tesla’s brand image, particularly as rivals have made significant advancements in technology and battery range, narrowing the gap with the electric vehicle leader. In the previous year, Tesla experienced a 1% decline in global vehicle deliveries, marking the first decrease in over ten years, despite a 25% increase in overall electric vehicle sales across the industry. In the United States, Tesla’s sales experienced a decline of 7% over the past year, followed by a further decrease of 2% in the initial two months of the current year, as reported by the research firm Wards Intelligence.
Concerning data has started to emerge in international markets. In February, new-vehicle registrations for Tesla experienced a significant decline of 76.3% in Germany and 26% in France, as reported by government and industry association data. Tesla’s operations in China, which serve as a hub for exports, reported the delivery of 30,688 new vehicles in February, reflecting a 49% decline compared to the same month last year. This downturn can be attributed, in part, to heightened competition from local electric vehicle manufacturers. Analysts point to market dynamics as a contributing factor to the declines, noting that consumers are holding off in anticipation of the upcoming refreshed Tesla Model Y set to launch this month. Nonetheless, it is asserted that Musk’s actions play a significant role, especially in the context of Germany. “Engaging in political maneuvering inherently carries certain risks,” stated Felipe Munoz, an analyst at the automotive consumer-research firm JATO Dynamics.
The surge in Tesla’s stock price following President Trump’s electoral win reflects investor optimism regarding the potential advantages of Elon Musk’s relationship with the administration for his enterprises. Investors responded positively to Musk’s increased emphasis on artificial intelligence and robotics at Tesla, which aims to commence production of its inaugural fully self-driving vehicle in 2026. This year, however, the shares have declined by 35%, erasing a significant portion of the gains observed following the election. Tesla maintains a valuation of approximately $847 billion, as reported by FactSet, surpassing that of any other automotive manufacturer.
Sales and survey data indicate that political factors are influencing demand dynamics. Recent survey data from research firm Morning Consult indicates a notable shift in consumer preferences, revealing that Republicans are now more inclined to purchase a Tesla compared to Democrats, marking a significant departure from the company’s historical trends. The proportion of Democrats indicating a willingness to purchase a Tesla as their subsequent vehicle fell from 23% in August 2023 to 13% in February, according to the data. During that timeframe, the proportion of prospective Republican purchasers increased from 15% to 26%.
Certain analysts suggest that conservatives exhibit greater reluctance in committing to an electric vehicle purchase, potentially complicating the conversion of increasing Republican backing into actual sales. Tesla refrains from providing state-specific sales figures; however, insights from new-vehicle registrations compiled by S&P Global Mobility indicate a significant decline in sales last year within certain progressive metropolitan regions that have historically contributed to the company’s expansion, such as New York, Los Angeles, San Francisco, and Dallas. Conversely, sales have experienced an uptick in Las Vegas, Salt Lake City, and Miami-Ft. Lauderdale.
“I once held the individual in high regard,” stated Diego Leporini, a Southern California entrepreneur who acquired his first Tesla in 2023. He now seeks to create a separation from Musk. The individual divested his 83 shares of Tesla stock as a form of protest against the CEO’s affiliations with Trump, he stated, and he is currently seeking to terminate his lease on the Model Y. Leporini, hailing from an immigrant background, noted that his wife, in-laws, and colleagues have expressed criticism regarding his decision to drive the car. “There has been considerable public discourse on the matter, and I understand the sentiments expressed,” he stated.
Musk transformed Tesla into the globe’s most valuable automaker primarily by appealing to consumers drawn to the firm’s commitment to environmental sustainability and technological advancement. Tesla’s articulated objective of hastening “the world’s transition to sustainable energy” has been a significant factor in attracting numerous employees to the organization. Throughout the years, Musk has increasingly voiced his opinions on contentious political matters. In 2020, he resisted Covid-era restrictions, challenging lockdown mandates and initiating legal action against the county where Tesla operates to maintain factory operations. In July of last year, in the wake of the assassination attempt on Trump, Musk aligned himself with the Republican nominee, investing approximately $250 million into pro-Trump political organizations.
In recent months, he has articulated on X that “alarmists” have overstated the pace of climate change. In December, he surprised numerous Europeans by supporting Germany’s far-right AfD party, a political entity that has contested Tesla’s Berlin factory and rejected the notion that climate change is anthropogenic. He has also indicated his backing for Reform UK, a populist party advocating for the elimination of policies aimed at combating climate change. During the inauguration of Donald Trump, he performed a gesture on two occasions where he extended his arm straight, with his palm oriented downward. Certain observers noted that it bore a resemblance to a Nazi salute. Musk has not explicitly clarified his intentions, yet he remarked on X: “The ‘everyone is Hitler’ attack is sooo tired.”
The response was immediate. At Tesla’s factory in Berlin, activists displayed an image of Musk making a particular gesture alongside the Tesla sign, accompanied by the words “heil.” Certain vehicle owners in the United States have discovered flyers affixed to their cars, encouraging them to consider selling their automobiles. Authorities in Arcata, California, have confirmed that four Tesla owners have come forward with reports of intimidating notes placed on their vehicle windshields.
Within Tesla, management has been addressing concerns regarding Musk’s conduct and its ramifications on sales, alongside implications for hiring and recruitment, especially in Palo Alto, California, where the company’s engineering office is located, as reported by an informed source. Jared Ottmann, with nearly seven years of experience as a supply-chain engineer, articulated his concerns regarding the arm gesture and other contentious remarks made by Musk in a LinkedIn post from January. “I have brought this matter to internal attention on several occasions, engaging with managers, HR, legal compliance, and investor relations,” stated Ottmann, who identifies as Jewish. “Despite the widespread personal support from individuals, the company Tesla has maintained a position of silence.” The absence of communication from Tesla is striking. Following his refusal to remove the post, Ottmann was dismissed, according to his attorney.
Thomas Temme, a senior software engineer at Tesla in Germany, remarked that Musk “now endorses political figures who not only disregard the mission but actively reject climate change and have a track record of opposing everything Tesla represents.” Temme expressed that he finds himself more at ease with public speaking compared to certain colleagues, attributing this comfort to the robust worker protections in Germany. Anil Patel, an engineer at Tesla for over four years, departed in December, informing colleagues via email: “I will take my one chance on the soapbox to state that the leadership and political actions of Elon’s company are the primary factors influencing my decision to leave Tesla.” The challenge of maintaining commitment to the climate mission statement is exacerbated by the significant concerns regarding potential harm to both individuals and the environment in the foreseeable future of this country.
Several board members and an executive have indicated that they perceive Musk’s close association with the president as advantageous, potentially affording him leverage on matters that may yield long-term benefits for the company, as reported by sources familiar with the discussions. Two members of Tesla’s board and several senior executives have publicly endorsed Musk’s engagement in politics and the policies he has adopted.
A segment of Tesla owners, however, has expressed that the ongoing controversy has reached an excessive level. Bob Eckert, identifying as a former admirer of Musk, indicated that his inclination to divest from his 2021 Model Y had been accumulating since the inauguration of Trump. “As time progressed, it became evident that sustaining this initiative was beyond our financial capacity, even in the event of incurring losses,” he stated. In February, he divested from his vehicle, incurring a $3,000 loss due to the outstanding loan exceeding the car’s market value, subsequently acquiring an electric Ford Mustang Mach-E. The Ford dealership presented him with a financing option at 0% interest, along with a cash incentive of $1,000 for switching allegiance from Tesla.
Larry Boughton, a 76-year-old retired mortgage banker from Houston, reported that after observing the news regarding Musk’s intentions for DOGE in early January, he concluded that he no longer wished to proceed with the two Cybertrucks he had ordered. He proceeded to his office and annulled his reservations. Broughton expressed, “Once he began to implement the initiatives that Trump advocated for, I found myself unwilling to participate.” “I currently hold a position in Tesla stock, and I am contemplating divesting that asset as well.”
