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“This has been our family car for three years, and it has been an absolute dream,” comments Ben Kilbey, showing off his shiny pearl-white Tesla Model Y.
As a strong advocate for electric vehicles, Ben runs a communications firm that promotes sustainable businesses across the UK. However, he now feels compelled to sell his Model Y, expressing strong disapproval of actions taken by Tesla CEO Elon Musk, particularly regarding his recent treatment of US government employees.
“I dislike polarization and unkind actions,” Ben explains. “There are numerous ways to handle situations without belittling individuals. I find belittlement unacceptable.”
Ben represents a growing segment of consumers who are voicing their dissatisfaction with Musk, particularly following his recent appointment to lead the contentious Department for Government Efficiency (DOGE), which has been criticized for its focus on reducing federal spending.
Moreover, Musk has also made international political waves, including a video appearance at a rally for the far-right Alternative für Deutschland party in Germany and public critiques of UK politicians, notably Prime Minister Keir Starmer.
This wave of discontent has sparked protests outside Tesla showrooms not just in the US, but in Canada, the UK, Germany, and Portugal. Though most demonstrations have remained peaceful, there have been incidents of vandalism, with some vehicles being damaged in France and Germany, and reports of cars being set ablaze.
In the US, the launch of the Tesla Cybertruck, an unconventional pickup model, has become a focal point for anti-Musk sentiment. Social media has seen videos depicting these vehicles defaced with symbols of hate or treated as playgrounds.
Former President Donald Trump quickly sided with Tesla, allowing the company to showcase its vehicles at the White House and condemning violence against its showrooms as “domestic terrorism.”
Musk condemned the violence, stating in an interview, “This level of violence is insane and deeply wrong. Tesla merely produces electric cars and has done nothing to warrant such brutal attacks.”
Assessing the long-term impact of these events on Tesla’s business strategy poses challenges, particularly regarding how Musk’s political involvement and comments may be alienating some traditional electric vehicle consumers.
A larger-than-life figurehead
Two decades ago, Tesla began as a modest start-up in Silicon Valley with ambitious goals to transform the automotive landscape. Today, it stands as the leading manufacturer of electric vehicles globally, bolstered by expansive production facilities worldwide and credited for demonstrating that electric vehicles can combine speed, power, enjoyment, and practicality.
Musk’s journey with Tesla began in 2004 when he joined as chairman and principal investor, advancing to CEO four years later, a role he has maintained throughout the company’s ascent.
“Tesla pioneered the electric vehicle market, driving it into the mainstream and prompting other carmakers to invest significantly,” remarks Stephanie Valdez Streaty, director of industry insights at Cox Automotive.
Historically, electric cars were often perceived as underwhelming and impractical, but the launch of the Model S in 2012, with performance akin to sports cars and over 250 miles of range, played a critical role in shifting this perception and fueling growth.
Today, Tesla has evolved beyond just vehicle manufacturing, heavily investing in autonomous driving initiatives aimed at deploying fleets of driverless “robotaxis.” Additionally, it has ventured into energy storage solutions and is working on the development of a humanoid robot, referred to as Optimus.
Musk, much like the late Steve Jobs at Apple, has become synonymous with the Tesla brand, frequently appearing at public events and garnering a loyal following among electric vehicle enthusiasts. However, he has simultaneously gained recognition for promoting his own political views across his social media platform, X, as Tesla contends with mounting challenges.
Musk’s activities have indeed harmed Tesla
Despite Tesla’s Model Y clinching the title of the world’s best-selling vehicle last year, overall sales saw their first decline in over a decade, slipping from 1.81 million to 1.79 million units.
This minor drop raised concerns for a company focused on growth, as profits also showed a downturn.
This year has begun poorly, particularly in Europe, where new registrations plummeted by 45% in January compared to the previous year. Other major European markets have exhibited similar declines, although the UK has reached a 21% increase in sales, with additional downturns in Australia.
Furthermore, shipments of Tesla’s vehicles produced in China witnessed a staggering 49% fall in January.
In early March, analyst Joseph Spak from UBS projected a global sales decline for Tesla of 5% in the upcoming year, contrary to broader market expectations of growth. This forecast triggered a sharp drop in Tesla’s stock, falling 15% in a single day, contributing to a total year-to-date decline of 40%.
Sales can falter for numerous reasons. However, research from Morning Consult Intelligence suggests that Musk’s recent actions have damaged Tesla’s reputation, particularly within the EU and Canada, yet China remains strong as a market.
In the US, analysts indicate a more complex situation, noting that while some consumers may support DOGE’s spending cuts, there are growing concerns that Musk might alienate prospective high-income customers who are looking to purchase electric vehicles, as Tesla’s standing among this demographic has seen a decline compared to competitors compared to the previous year.
As Tesla did not respond to inquiries regarding its sales drop, experts contend that the challenges facing the automaker extend beyond the CEO’s public image.
Dated models and overseas competition
Initially, Tesla’s product line was cutting edge, but it now faces criticism for falling behind competitors in innovation. The Model S has been in the market since 2012, and the Model X since 2015, while even the most recent models, such as the Model 3 and Model Y, are starting to appear stale amidst a progressively competitive marketplace.
“Their product lineup lacks freshness; apart from the niche Cybertruck, there have not been significant model launches lately,” observes Ms. Valdez Streaty. “They have refreshed the Model Y, but it hasn’t created a substantial impact.”
Professor Peter Wells from Cardiff University’s Centre for Automotive Industry Research expresses similar concerns, stating, “The level of innovation in their product lineup hasn’t met expectations, which is a significant aspect of their current dilemma.”
Competition now emerges from both traditional automakers and newer electric vehicle brands, particularly from China. Companies like BYD are rapidly gaining traction by offering quality performance at competitive prices, while luxury brands such as Xpeng and Nio are emphasizing advanced technology.
“China indeed has robust incentives and subsidies for electric vehicles,” notes Valdez Streaty. “Consequently, companies like BYD are not just growing in China, but are also expanding their reach to other global markets, posing a serious threat not only to Tesla but to all manufacturers.”
This competitive edge was highlighted in March when BYD introduced an ultra-fast charging system capable of delivering 250 miles of range in just five minutes, substantially overshadowing Tesla’s existing supercharging infrastructure.
The question of robotaxis
Musk’s focus seems to be shifting towards autonomous driving, as indicated in earnings calls where he suggested that a robotaxi service could launch in Texas by June. However, many observers remain skeptical, noting that Musk’s previous timelines for autonomous vehicles have often fallen short.
In 2019, he predicted that there would be a million Teslas functioning as robotaxis within a year. Yet, Tesla’s current “Full Self Driving” feature still requires drivers’ constant attention to operate safely.
“Each year, we hear new promises from Musk about the imminent arrival of fully autonomous vehicles, yet they never seem to materialize,” critiques automotive consultant Jay Nagley.
Is Musk spinning too many plates?
Amidst these challenges, Tesla is in need of solid leadership. Nonetheless, Musk appears to be juggling numerous responsibilities, managing a variety of other companies, including the social media platform X, AI firm xAI, and SpaceX, which has faced its own setbacks with the recent Starship rocket launches.
In a Fox Business interview, Musk acknowledged the challenge of managing his various commitments, admitting it is “hard.”
“It’s difficult to determine just how hands-on Musk remains with Tesla,” says Professor Wells. “If he is indeed making key decisions related to product development and factory locations, those decisions must be effective. Tesla requires a leader who is fully engaged and knowledgeable about the automotive industry to steer it correctly.”
Since Musk’s entry into Tesla in 2004, his leadership has essentially been unchallenged. Currently, he maintains his position as the largest shareholder, holding around a 13% stake worth over $95 billion.
This stake rivals the collective shares held by investment titans Vanguard and Blackrock, along with smaller holdings from firms like State Street Bank and Morgan Stanley.
While recent declines in stock value worry investors, shares are still approximately 30% higher than they were one year ago. The current downturn merely reverses gains from a substantial increase following a prior election, which had nearly doubled Tesla’s market valuation.
Calls for new blood at the top
At present, Tesla remains valued at over 100 times its earnings, a significantly higher ratio compared to traditional automakers like Ford, General Motors, or Toyota, indicating that investors are banking on rapid innovation and growth.
“Tesla’s valuation reflects expectations that it will dominate the electric vehicle market, which seems unlikely given the rise of Chinese manufacturers,” remarks Mr. Nagley.
Though key investors have not actively pursued changes in leadership, Ross Gerber, a long-standing shareholder who has become a vocal critic, recently suggested Musk should step down.
Despite this, analysts assert that the company would benefit from a fresh leadership perspective. “Bringing in a new CEO could undeniably be advantageous for Tesla at this juncture,” asserts Matthias Schmidt from Schmidt Automotive Research.
“Such a change could mitigate the negative influence of Musk’s actions, eliminate the conflicts stemming from his DOGE position, and allow a determined CEO to focus entirely on operational needs,” he adds.
Professor Wells concludes, “The direction at Tesla suggests that fresh leadership is necessary, particularly someone with deep automotive expertise, capable of rationalizing the business operations.”
“A significant shift in strategy is clearly needed now.”
BBC InDepth is a platform featuring in-depth reporting and analysis, providing fresh perspectives on major contemporary issues.
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