One of the leading investors and supporters of Tesla has said that the EV giant faces a “moment of truth”, and has suggested that CEO Elon Musk may have to step down because of the time he spends on his right wing political campaigns, and the controversy that creates.
“It has turned into a brand crisis, a brand crisis tornado,” says Dan Ives, the head of Wedbush Securities, and one of the most bullish investors in Tesla. He still has a buy rating on the company, and a price target of $US550, two and a half times higher than its current price.
“A few weeks ago it felt contained,” Ives says. “Now it has turned into a brand crisis, a brand crisis tornado. The future of Tesla will really be determined by how Musk handles the next few months, it is that much of a white knuckle moment.”
The comments by Ives are significant, because many Tesla fans and shareholders have pushed back against the media for chronicling the slump in car sales and the share price, blaming some sort of conspiracy against the company. They say there should be no connection between Musk’s political views and the brand and its products, which are widely admired.
But the comments by Ives show that it does matter. Ives and other analysts from UBS, Morgan Stanley, Baird, and JP Morgan have all downgraded their sales forecasts because of the consumer backlash against Musk’s actions, and are now saying this is a problem that needs to be owned by Musk himself, rather than deflected back to the media.
There are two major issues – the amount of time that Musk is spending on his political campaigns, and not on Tesla and his other business interests, and the response to his far right political tropes, along with his attacks on government agencies, institutions, the justice system, and the media.
“Tesla has become a political symbol and that is a bad thing for any brand,” Ives says. “Brand perception matters because do current customer buy more Teslas.”
It is a critical moment because Tesla has been the dominant electric vehicle brand in the global market, and remains so in countries like the US and Australia, where it has until recently held a more than 50 per cent share. What happens to Tesla could well dictate the future of the EV transition in those countries, and the public perception of it.
Tesla sales have been driven by the fact that it is widely perceived as the best EV on the road, and the best value. But many customers also bought the climate change and fossil fuel transition story that Musk promoted. They are dismayed that he has now dumped those ideals.
Problems are piling up. Sales have plunged, partly due to the wait and retooling for the new Model Y, but also due to that consumer pushback, causing even the most bullish analysts to slash their sales forecasts. Competition is increasing from a wave of Chinese auto makers, and Tesla has its own major product problems, particularly with the Cybertruck.
It was revealed this week that the Cybertruck is being recalled because of sheets of laminated metal were peeling off the radically shaped vehicle and falling on to the road. A total of 46,000 units are being recalled, which analysts noted suggests that sales – despite access to be big rebate, and offers of free charging, are not doing well.
In the meantime, shares in its biggest rival BYD have surged, most recently on its promise of super-fast charging times that will allow its EVs to charge in just five minutes, about the same time it takes to top up a petrol or diesel tank. Tesla, which once led on innovation, is now seen as stagnant, with much of its value based on FSD and AI hopes.
Musk has gone to extraordinary lengths to garner support, including having president Donald Trump endorse his products in front of five of his vehicles on the White House lawn, and promising to buy one, and getting the US Commerce secretary to deliver an unprecedented endorsement.
But the push back from the community is intensifying. Many owners are having second thoughts about owning Teslas, as are new customers. Protests in the US, Germany, the UK and Canada are widespread, and are now reaching dangerous levels with arson attacks and vandalism.
Surveys have suggested that brand value is also deteriorating. JP Morgan described the destruction of Tesla’s brand as “unprecedented”, and even Morgan Stanley reported widespread pushback from its clients.
One German online publication T-Online did a survey that got 100,000 responses and found 94 per cent would not buy a Tesla. A day or so later the Tesla-booster publication Teslarati claimed the conclusions were fake, because in the end more than 300,000 had voted and more than two thirds said they would buy a Tesla.
But T Online later noted that the bulk of the additional 200,000 votes came from just two IP addresses in the US. The survey had been deliberately hijacked by bots, it said.
Another survey conducted by the business daily Handelsblatt also points to a significant weakening in the demand for Tesla EVs in Germany, where Musk’s support for the far-right AdF and what are seen as his nazi-style salutes are particularly offensive.
But corporates and governments are also pushing back. In Canada, the government of British Columbia excluded Tesla chargers, batteries and inverters from a rebate program. “It’s because of Elon Musk,” premier David Elby said.
Newsweek now reports that Tesla has been excluded from one of north America’s largest car shows, to be held in Vancouver, because of safety concerns. Overnight, Canadian news reports said 80 Tesla cars were vandalised outside a dealership in Hamilton.
Ives from Wedbush ays it is the political component that is damaging to Tesla. “If you continue down this path, that’s where you have permanent brand damage,” he said.
And people are clearly confused. Tesla drivers have often been victims of what is known as “coal rolling” – where big diesel utes in the US emit black smoke in front of Telsa EVs. Overnight, the coal rolling was directed at Tesla protesters. As Electrek wryly noted: “No one knows which side is which any more.”
Tesla shares have halved since their December peaks, but in the last few trading days have held steady in and around $US235.
Giles Parkinson is founder and editor of The Driven, and also edits and founded the Renew Economy and One Step Off The Grid web sites. He has been a journalist for nearly 40 years, is a former business and deputy editor of the Australian Financial Review, and owns a Tesla Model 3.