Tesla's Fortunes Fall as Musk Rises in Trump World

Dow Jones
08 Mar

Few brands have their image as closely tied to their CEO as Tesla. For most of the electric-car maker's history, that was good for business.

Elon Musk's pledge to reduce the world's reliance on fossil fuels and his push to broaden the appeal of electric cars attracted legions of buyers looking to make a statement -- to declare their allegiance to his grand vision of techno-environmentalism.

Now that Musk has allied himself with Donald Trump and plunged into the deep end of national politics, many Tesla owners and would-be buyers are asking themselves what kind of statement it makes to get behind the wheel of a Tesla these days. Such doubts have begun showing up in worrisome numbers for the company.

Garth Ancier, a TV executive from Los Angeles, recalled discussing more than a year ago with two fellow owners what it felt like to be seen in a Tesla. "They said, 'You know, I'm getting uncomfortable driving this car around because it's like driving a big red MAGA hat,'" Ancier said.

Now Ancier wants to sell his 4-year-old Model X. "If not for his behavior, I'd probably stick with a Tesla."

Tesla, the nation's largest producer of electric vehicles by far, has long led the auto industry in consumer loyalty, and surveys show many owners have no intention of abandoning the brand now. Yet recent polling shows that the brand's appeal has been eroding, and sales data suggest it has begun taking a financial toll.

Back in 2022, before Musk waded into presidential politics, automotive consulting firm Strategic Vision found that 22% of car shoppers surveyed said they would "definitely consider" a Tesla for their next vehicle purchase. That put Tesla on par with other luxury car brands such as Mercedes-Benz and BMW, said Alexander Edwards, the firm's president.

By last summer, that percentage had dropped to 7% -- roughly in line with Lincoln and Dodge -- and it has stayed there, a precipitous decline that is rare in the car business, Edwards said.

"At this point, we don't see any signs of recovery," Edwards said, noting that Tesla's historic appeal to environmentally minded buyers and Musk's right-leaning politics are at odds. About 63% of those surveyed in December said they wouldn't consider buying a Tesla, a roughly 10-percentage point jump from spring of last year.

Neither Tesla nor Musk responded to requests for comment for this article.

In recent weeks, after Musk pushed for mass firings of federal workers and backed a far-right political party in Germany, protesters have demonstrated at Tesla showrooms in the U.S. and Europe, and some Tesla stores and Supercharger stations have been vandalized, including with spray-painted swastikas.

Tesla's challenges extend well beyond any backlash to Musk's politics. The company's sales and profitability have been under pressure because of its relatively old vehicle lineup and intensifying competition from other automakers trying to lure buyers with aggressive promotions. Quality problems and plunging resale values also have weighed on Tesla's brand perception, especially as competitors have caught up with the electric-car pioneer on technology and battery range.

Sales hits

Last year, Tesla's worldwide vehicle deliveries slipped 1%, the first drop in more than a decade, even though industrywide EV sales rose 25%. In the U.S., Tesla sales fell 7% last year, and by 2% in the first two months of this year, according to estimates by research firm Wards Intelligence.

And worrisome numbers have begun surfacing in foreign markets. In February, Tesla new-vehicle registrations plummeted by 76.3% in Germany and 26% in France, according to government and industry association data. Tesla China, which exports to other countries, delivered 30,688 new cars in February, down 49% from the year-earlier period, partly because of increased competition from domestic EV makers.

Analysts attribute the declines partly to market factors, including customers waiting for a refreshed Tesla Model Y scheduled to be released in this month. Still, they say, Musk's actions are a factor, particularly in Germany.

"When you play politics, there is always a risk," said Felipe Munoz, an analyst with the automotive consumer-research firm JATO Dynamics.

The value of Tesla's stock skyrocketed after President Trump's victory, with investors hopeful that Musk's proximity to the president would benefit his businesses. Investors also liked Musk's heightened focus on artificial intelligence and robotics at Tesla, which plans to start building its first fully self-driving car in 2026.

This year, though, the shares have dropped 35%, wiping out most of the postelection gains. Still, Tesla is valued at about $847 billion, according to FactSet, more than any other car company.

Sales and survey data suggest that politics is affecting demand. Republicans are now more likely to say they would buy a Tesla than Democrats, a sharp reversal from much of the company's history, according to survey data from research firm Morning Consult.

The percentage of Democrats who said they would consider buying a Tesla as their next vehicle declined from 23% in August 2023 to 13% in February, the data show. Over that same period, the percentage of would-be Republican buyers grew from 15% to 26%.

Some analysts said conservatives are more hesitant to pull the trigger on an EV purchase, which might make it more difficult to turn rising Republican support into sales.

Tesla doesn't disclose sales figures by state, but data on new-vehicle registrations collected by S&P Global Mobility suggest that sales declined sharply last year in some left-leaning metropolitan areas that have been core to the company's growth, including New York, Los Angeles, San Francisco and Dallas, and while rising in Las Vegas, Salt Lake City and Miami-Ft. Lauderdale.

"I used to idolize the guy," said Diego Leporini, a Southern California entrepreneur who bought his first Tesla in 2023. Now, he wants to distance himself from Musk. He sold off his 83 shares of Tesla stock in protest of the CEO's ties to Trump, he said, and he is trying to get out of his Model Y lease.

Leporini, who comes from a family of immigrants, said his wife, in-laws and colleagues have criticized him for driving the car. "People have been pretty vocal about it, and honestly, I get it," he said.

Musk built Tesla into the world's most valuable automaker largely by courting customers attracted to the company's environmentalism and techno-optimism. Tesla's stated mission of accelerating "the world's transition to sustainable energy" was what drew many employees to the company, too.

Playing politics

Over the years, Musk became more outspoken about divisive political issues. He pushed back on Covid-era restrictions in 2020, defying lockdown orders and suing Tesla's home county for the right to keep its factory running. Last July, following the Trump assassination attempt, Musk threw his full support behind the Republican nominee, ultimately pouring about a quarter-billion dollars into pro-Trump political groups.

In recent months, he has posted on X that "alarmists" have exaggerated the speed of climate change. In December, he stunned many Europeans by endorsing Germany's far-right AfD party, a political group that has opposed Tesla's Berlin factory and denied climate change is man-made. He also has expressed support for Reform UK, a populist party that wants to scrap policies to fight climate change.

At Trump's inauguration, he twice made a gesture in which he held out his arm straight, with his palm facing down. Some viewers said it resembled a Nazi salute. Musk hasn't directly commented on what he intended, but wrote on X: "The 'everyone is Hitler' attack is sooo tired."

The reaction was swift. At Tesla's factory in Berlin, activists projected next to the Tesla sign an image of Musk making the gesture, and the words "heil."

Some U.S. owners have found fliers on their cars urging them to sell their vehicles. Police in Arcata, Calif., said that four Tesla drivers reported threatening messages left on their windshields.

Inside Tesla, managers have been confronting questions about Musk's behavior and its impact on sales, as well as on hiring and recruitment, particularly in Palo Alto, Calif., where Tesla has its engineering office, according to a person familiar with those conversations.

Jared Ottmann, who had worked for nearly seven years as a supply-chain engineer, expressed concern about the arm gesture and other controversial comments by Musk in a LinkedIn post in January.

"I've raised the issue internally multiple times, with managers, HR, legal compliance, investor relations," wrote Ottmann, who is Jewish. "And while overwhelmingly people offer personal support, Tesla as a company has remained silent. The silence from Tesla is deafening."

After refusing to take the post down, Ottmann was terminated, his lawyer said.

Thomas Temme, a senior software engineer at Tesla in Germany, said Musk "now supports political actors who not only don't care about the mission, but who proactively deny climate change and have a history of fighting everything Tesla stands for." Temme said he feels more comfortable speaking publicly than some of his colleagues because of Germany's worker protections.

Anil Patel, who worked as an engineer at Tesla for more than four years, left in December, telling colleagues in an email: "I will take my one chance on the soapbox to say that Elon's company leadership and political actions are the biggest reasons I'm leaving Tesla. It's become impossible for me to cling onto the climate mission statement when I fear so much harm to people and the environment coming in this country's future."

Some board members and one executive have told people they see Musk's close relationship with the president as a positive, giving him influence over issues that could benefit the company longer term, according to people familiar with the conversations.

Two Tesla board members and some senior executives have expressed support publicly for Musk's political involvement and some of the policies he has embraced.

Some Tesla owners, though, have said the controversy has gotten to be too much.

Bob Eckert, who described himself as a onetime Musk fan, said his desire to sell his 2021 Model Y had been building since Trump's inauguration. "As the days and weeks went on, we realized it was not something we could afford to support, even if we lost money," he said.

He unloaded his vehicle in February, taking a $3,000 financial hit because he owed more on his loan than the car was worth, replacing it with an electric Ford Mustang Mach-E. The Ford dealer offered him 0% financing and a $1,000 cash bonus for defecting from Tesla.

Larry Boughton, a 76-year-old retired mortgage banker from Houston, said he was watching the news about Musk's plans for the DOGE in early January and decided he no longer wanted the two Cybertrucks he had ordered. He walked to his office and canceled his reservations.

"As soon as he started doing all this stuff that Trump wanted him to do, I didn't want to be a part of it," Broughton said. "I actually own some Tesla stock, and I'm thinking of selling that as well."

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