During Teslaâs earnings call this week, after the top electric vehicle maker posted disappointing results with worse-than-expected revenue from its car business, analysts and retail investors did not CEO Elon Musk the most obvious question: Why did you announce your vocal support for Donald Trump for president, when that could politicize Teslaâs brand for its mostly Democratic buyers?
Muskâs only acknowledgment concerning the heated political campaign was conceding that a second Trump Administration would hurt Teslaâs auto business if it makes good on ending EV-related subsidies from the Inflation Reduction Act, which have provided big financial benefits for Tesla and made its cars cheaper for consumers to buy. He also conceded Tesla might not move ahead with plans for a plant in Mexico as Trump has said heâd jack up import tariffs on autos made there.
âI guess it would be like some impact but I think it would be devastating for our competitors,â Musk said. âIt would hurt Tesla slightly.â
Tesla shares were down about 12% to about $217 in Nasdaq trading on Wednesday.
But the risk Muskâs company faces is far greater than the potential loss of $7,500 tax credits for its buyers and generous incentives for its battery plants created by the law. (And it should be noted, that the Biden Administrationâs legislation seeks to do exactly what the worldâs wealthiest person once claimed was Teslaâs purpose: âhelp expedite the move from a mine-and-burn hydrocarbon economy towards a solar electric economy.â) Musk is inseparable from the Tesla brand, so associating it with Donald Trump, a vocal skeptic of climate change, could cause more consumers to shun it.
âElon isn't doing anything with the thought of what's best for Tesla at this point,â said Ross Gerber, CEO of Los Angeles-based wealth manager Gerber Kawasaki and once among Muskâs biggest fans. âTesla sales in California are down substantially because of this. California is the biggest market for Tesla and one of the biggest markets for cars in the world. About 25% of the cars in California purchased are now EVs. So when you think about the brand damage, itâs now beyond repair.â
âWhen you think about the brand damage, itâs now beyond repair.â
While Tesla vehicle sales worldwide dropped 5% to 443,956 units in the yearâs first half, they were down 17% in California, where the company logged 102,106 sales in the same period, the California New Car Dealers Association reported this month. At 23% of Teslaâs total volume, the Golden State is by far its top market, rivaled only by China, the worldâs biggest buyer of EVs.
And among U.S. buyers, people who identify as Democrats are most likely to purchase electric cars and trucks.
âDemocrats have an overwhelmingly more favorable opinion of EVs, with only 5% claiming to dislike EVs compared to 39% of Republicans,â said Jessica Caldwell, head analyst for auto market researcher Edmunds, citing data the company has compiled. âAs Americaâs partisan divides widen, Elon Musk's very public support of former President Donald Trump has the potential to alienate Democratic-leaning consumers who are more likely to be EV buyers, and could therefore pose a significant threat to Teslaâs bottom line.â
Already the appeal of both Musk and Tesla to Democrats is dropping noticeably this year, according to Civic Science, a Pittsburgh-based consumer research firm.
âIf we look month over month with how Tesla is viewed by Democrats we do see a decline in favorability,â said Rachel Clayton, Civic Scienceâs senior vice president, citing responses from more than 16,000 people surveyed. âIn January it was 36% favorable, 31% neutral and 33% unfavorable. Favorable has dropped since then to just 17% for Democrats. Neutral is now 45% and unfavorable is 38%.â
Muskâs appeal to people who identify as Democrats is also falling, though it was already low with that group, based on responses from more than 8,000 people. âIt's been pretty much flat, but his favorables have fallen from 29% in January to 25% now among Democrats,â Clayton said.
Conversely, heâs way up with Republicans. For most of this year, âfavorables for Musk among Republicans were flat, flat, flat at 50%, dipped a little bit in June, and then shot right up to 58% in July.â Musk officially endorsed Trump on July 13, after the former president was shot.
Unfortunately, theyâre not as interested in Teslaâs main product. Just 19% of Republicans have a favorable view of EVs, according to Edmundsâ data.
During the earnings call, Musk attempted to gin up excitement for Tesla about its robotaxi ambitions and sales of humanoid worker robots, though itâs far from clear when those products could meaningfully contribute to Teslaâs earnings.
For his part, investor Gerber is abandoning the brand. This week he put his 2021 Tesla Model S up for sale, seeking $70,000 for the sedan. âVery low mileage and in perfect condition. New would cost $106k. DM me if interested. Itâs a great vehicle but Iâve decided to say goodbye.â