Tesla's founder, Elon Musk, returns; questions arise over potential lasting impacts.
Rewritten Article:
Elon Musk is heading back to Tesla. But the question now is if it's too late to repair the harm he's caused.
Musk announced to investors Tuesday that he'll step down from running the Department of Government Efficiency (DOGE) next month. He plans to devote more time to Tesla instead, only spending a couple of days a week at DOGE.
However, even with Musk pouring more effort into Tesla, it's clear that his political alliances have already taken a toll on the company. There have been protests outside showrooms and vandalism at facilities. Recently, the automaker revealed a massive drop in sales during the first quarter, which might have lasting, detrimental effects.
Some Tesla optimists believe Musk's departure from DOGE will help the company avoid further issues. Shares of Tesla (TSLA) increased more than 3% Wednesday, even after reporting a 71% plunge in net income due to plummeting sales worldwide.
But even Dan Ives of Wedbush Securities, Tesla's most prominent optimist on Wall Street, predicts a 10% permanent drop in sales due to Musk's political image.
"The brand damage caused by Musk in the White House/DOGE over the past few months will not vanish just with this move, and some of the damage will be indelible in Europe and the US," Ives said in a Wednesday note to clients.
Musk dismissed the idea that his political activities have caused any brand damage. Instead, he blamed the dwindling sales on economic factors and car buyers' uncertainty.
However, other automakers saw a rise in sales during the quarter, particularly in their own electric vehicles. Tesla CFO Vaibhav Taneja acknowledged that there had been opposition.
"There has been much speculation about the reasons for the decline in our vehicle deliveries in the first quarter," Taneja said. "The negative impact of brand protests and hostility towards our company and people had an effect in certain markets."
The damage to the Tesla brand by Musk's controversial political activities might be more severe than analysts admit.
"The idea that he's now focused solely on Tesla, so sales will improve, is complete nonsense," said Gordon Johnson of GLJ Research, a harsh Tesla critic. Johnson argued that Musk has permanently alienated liberal buyers, who were Tesla's natural market due to their environmental concerns.
Tesla sales began to decline in early 2024 after Musk allowed Nazi sympathizers back onto his social media platform and expressed his own right-wing views. This behavior isn't likely to stop, even if Musk leaves the White House for good.
"The damage Musk has done is 100% irreversible," Johnson declared.
Some Trump supporters may become more inclined to buy Tesla, but that's not enough to replace the lost sales from liberal buyers, argued Kelly O'Keefe, founder of branding consultant Brand Federation. He calls Musk's impact on the Tesla brand in recent years "brand homicide."
"The decline in Tesla's fortunes before the DOGE era demonstrates the decline of a brand built around the urgency of climate change, a symbol of environmental concern," O'Keefe remarked. "Now, the brand is spiraling."
"It was a brand that people were proud to own," he added. "I'm unsure how you can lift the stain off Musk's behavior."
Insight: Elon Musk's political profile has had significant and potentially long-lasting impacts on the Tesla brand, both in the US and Europe. In the US, Musk's support for President Donald Trump and right-wing causes has alienated liberal consumers, while Republican consumers may be more inclined to buy Tesla. In Europe, Musk's association with controversial figures like German neo-Nazis has led to global protests against Tesla, damaging its reputation. This backlash, along with Musk's controversial statements and behavior, has contributed to a challenging business environment in Europe. Analysts warn that this damage might be difficult to reverse, especially as global consumers grow increasingly aware of corporate political alignments.
- Despite Elon Musk's decision to focus more on Tesla, the brand's detrimental effects from his political image, particularly among progressive consumers, are likely to persist.
- The damage to Tesla's brand, due to Musk's controversial political activities, might be more severe than analysts acknowledge, causing a decline in sales, especially in European markets.
- Dan Ives of Wedbush Securities predicts a 10% permanent drop in Tesla sales due to Musk's politically charged image, suggesting that the brand damage caused during his White House tenure will not vanish with his departure.
- The protests and vandalism against Tesla, sparked by Musk's political alliances, have contributed to a challenging business environment, affecting the company's sales, particularly during the first quarter.
- Even though some Tesla sympathizers believe Musk's departure from the Department of Government Efficiency (DOGE) will help the company avoid further issues, there's a strong likelihood that Tesla will continue to face pushback from its controversial political associations.
