Is Tesla really a damaged brand?

Here’s a question I grapple with every week: Is Elon Musk’s worldview actually significantly hurting Tesla sales, or is the media simply reflecting their views on the Tesla CEO?

The headlines: Let’s start with three examples from major news outlets reporting that Elon Musk is damaging the brand. These are just three of dozens of media reports (though some of them are just repetitions of these stories). “Potential Tesla buyers are breaking the company’s back as Musk’s reputation sinks,” writes Reuters, citing market research firm Caliber. Another example comes from the Washington Post: Elon Musk’s embrace of Trump is alienating these Tesla lovers. And another from the New York Times. Elon Musk’s policies could scare some Tesla buyers away.

Do you see a trend? The articles say that Musk’s “right-wing” policies are alienating buyers. The New York Times focuses on Musk’s politics and his alleged emotional instability: “But as Mr. Musk’s public image has become increasingly right-wing, Tesla appears to be paying a price in sales.” It goes on to say: “His image as an unpredictable, impulsive executive appears to have rubbed off on the cars, raising doubts among some people about their quality and helping to explain why Tesla sales have fallen.”

Is Tesla collateral damage? So is the media simply projecting their views on Musk or is there real collateral damage to Tesla? Let’s look at the recent numbers, because this trend should be commonplace by now, as the story of Musk’s brand damage has been around since at least October 2022, when Musk completed the purchase of Twitter. (Tesla’s brand damage is hotly debated on the Tesla Motors Club forum.)

One of the most telling statistics concerns the calendar year 2023: According to Cox Automotive/Kelley Blue Book, Tesla sold 654,888 vehicles in the U.S., up 25.4% year-over-year. In the second quarter of this year, Tesla was still by far the best-selling electric car brand in the U.S., with a 50.8% market share, and the company recorded sales of 304,451 vehicles by the end of the second quarter, according to Cox Automotive/Kelley Blue Book. However, it lost market share, by 9.6% (year-to-date) compared to the same period last year.

But is the loss of market share in the second quarter due to a wave of anti-Musk sentiment or simply a maturing EV market with a flood of new players grabbing a bigger piece of the pie? I’d argue the latter. Yes, there’s probably a small, vocal minority of owners and potential buyers who don’t like Musk’s policies and won’t buy a Tesla. But I doubt that’s having much of an impact on Tesla’s quarterly numbers. More likely is increased competition, which was virtually nonexistent until a few years ago. Cadillac Lyriq EV sales, for example, rose 465% in the second quarter, reaching 13,000 vehicles year-to-date. Mercedes EV sales rose 11.7% to 21,520 vehicles. And Rivian’s sales rose 33% in the second quarter to 27,378 vehicles — one of several examples of up-and-coming electric car brands in the U.S.

Withdrawal from the electric vehicle market: let’s not forget that the overall electric vehicle market is also going through a decline. (See: Auto industry’s exit from electric vehicles accelerates – WSJ). This consumer shift toward electric vehicles is likely weighing on Tesla’s recent numbers as well. And a recent article in Japan’s Nikkei BP makes a compelling case for the rise of hybrid and plug-in hybrid vehicles (PHEVs). For example, PHEV sales have overtaken electric vehicle (also known as BEV or battery electric vehicle) sales in Europe. And Toyota has been gaining market share in the U.S. with sales of PHEVs like the RAV4 Prime.

And that’s exactly where the problem lies: Consumers today want more choice: I live in EV-friendly Los Angeles. I recently asked a liberal friend from West Hollywood who was looking to buy her first electric car if she would buy a Tesla. She said “no,” but not for a reason the Washington Post and New York Times might hear. “They’re everywhere. I want to drive something more unique and not as expensive.” She ended up buying a Chevy Bolt EUV because of the price. She didn’t mention a word about Musk’s political views. My neighbor owns a BMW EV because he got a deal through his employer. And I own a Chevy Bolt EV. But that has nothing to do with Elon Musk. The Bolt is just a very practical, inexpensive electric car. My point: The vast majority of Americans buy a car for practical reasons, not because of a CEO’s political views.

Think carefully about what you want – do conservatives have their eye on electric vehicles? Which brings me to my final point. A neighbor a few doors down owns a Cybertruck. He was kind enough to let me take it on a long drive to Ventura County, and we talked about Elon Musk as we drove. “I love Elon. I’m not part of that other clique,” he said, referring to the anti-Musk element. So be careful what you wish for. While the media may prefer to support a small segment of liberal-leaning buyers who choose not to buy a Tesla, there seems to be a growing group of conservative buyers who view electric vehicles more positively because of Musk’s support for Donald Trump, and vice versa. Will this ultimately serve as a counterbalance to liberal antipathy toward Musk? I don’t know, but I know the kinds of customer-facing things that are much more likely to hurt the Tesla brand in general in the future. Things like quality control, declining resale value, uninspired design, and product delays.

I asked one level-headed analyst for his opinion. “There’s a reason executives in most industries never make their political views public,” said Sam Fiorani, vice president at AutoForecast Solutions. “If the consumer of a particular product agrees with your political stance, it’s rare that they’ll buy a product they didn’t originally intend to buy,” he said. “(Conversely) if that consumer disagrees with your political stance, it’s possible to lose them as a customer.”

“Publications reporting on this potential can encourage others to follow the trend, just as reports on public opinion on rising inflation or other negative economic factors can deter consumers from buying,” he said. But that doesn’t necessarily mean it will make much difference. “The idea that just talking about it would dramatically increase momentum assumes a more homogenous buyer base than actually exists in the U.S.”