Tesla Takes a Hit: Elon Musk’s X Drama Rocks the Company
In a Senate race in 1990, Michael Jordan faced a question regarding his decision not to support the African-American Democratic candidate in his home state of North Carolina. Even after three decades, he continued to clarify his response to reporters, stating that he did not consider himself an activist like Muhammad Ali and simply saw himself as a basketball player. Jordan’s explanation, “Republicans buy sneakers too,” was his way of expressing his non-partisan stance.
Elon Musk may consider himself an entrepreneur and celebrity, but he wears many hats with gusto, including being an activist for free speech. His latest outrage supporting X’s anti-Semitic comment has sparked a backlash, including companies pulling ads from the social media platform. But it could also have implications for the main source of his fame and fortune: Tesla Inc.
Tesla has, of course, slipped through many of Musk’s previous controversies, including ones with direct legal implications (“funding secured.”) Today, the EV market has become sharply more competitive, as Tesla’s own margins and missed sales estimates show, and the price cuts show , that buyers think twice about electric cars. Musk’s company is also playing with a long-delayed new model, the Cybertruck, whose price and specifications remain a mystery 10 days after launch. Noting the many headlines about Americans falling in love with electric vehicles, Alexander Edwards, CEO of Strategic Vision, a consumer behavior consultancy, says, “There’s never been a love affair with the electric car.” He’s right: while electric car sales in the U.S. grew by about 50% in the third quarter, they accounted for just 7.9% of total new vehicle sales.
For all the progress so far, buying an electric car in the US is still unusual, and as Edwards points out, the customer has to make trade-offs, whether it’s choosing from a relatively limited model range — and paying for it — installation. charger in their garage or just to cycle through public charging instead of adding gas.
Electric cars and clean technologies in general have become politicized as part of the US’s broader conflation of climate science and culture wars. Electric vehicle purchases are strongly correlated with Democratic political support at both the state and county levels, according to a new paper from Berkeley’s Haas Energy Institute. The correlation is strong even when controlling for factors such as income, population density and gasoline prices, or excluding West Coast electric vehicle hotspots. Republicans also buy electric cars, but they undoubtedly buy more sneakers.
Does living in a blue state or county mean Musk endorses anti-Semitism, a deal breaker with the new Model Y? That is very difficult, if not impossible, to answer. The point is, ignoring the moral dimension is not the time to unnecessarily alienate potential buyers from your core customer base. Another takeaway from the third-quarter EV sales numbers is that Tesla’s market share fell to 50 percent, the lowest on record, according to Cox Automotive; and this despite drastic price reductions throughout the year.
Strategic Vision noted a decline in enthusiasm for Tesla last December, due to negative associations with Musk’s acquisition of Twitter Inc. and subsequent changes to the platform. In a study of 38,000 vehicle buyers, Strategic Vision found that Tesla lost ground in all areas of brand equity in 2022, providing an opening for competitors. If the legacy automakers had been more nimble in their electrification plans, Tesla’s market share could have fallen even further.
Musk is trying to quell the latest backlash, denying accusations of anti-Semitism in a tweet this weekend. He has at times quickly reversed course when faced with an unexpected move by Tesla, most notably when he announced in 2019 that the company would close virtually all of its retail locations and that his company would impose impractical steering “ikees” on new ones. models earlier this year. Of course, these are not comparable disputes; The thing is, Musk’s ferocity, in some respects a strength, can also expose his company to real risk, as he himself sometimes seems to know.
Adding X to Musk’s stable creates a structural risk for Tesla. There is a financial connection given Musk’s personal exposure to the loss of value in X; his strong selling of Tesla stock in 2022 accelerated when it became clear he would have to take advantage of his overpriced tender offer. However, the wild card is brand visibility. Musk is very much an X, where for either personal or financial reasons — perhaps both — he seems to see controversy as currency. And as much as the rest of the auto industry, Musk is also Tesla. In the competitive electric car market, at least some customers may prefer a car brand that is just a car brand.
