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Is Elon Musk Destroying Tesla's Brand?
Quick. How many auto company CEOs can you name?
Chances are you came up with a few dead ones – Henry Ford, Ferdinand Porsche, Enzo Ferrari, and Lee Iacocca – and only one live one – Elon Musk, CEO of Tesla.
Of course, Musk owns (or owned) a bunch of companies, including PayPal, Space X, Twitter, Neuralink, The Boring Company, and more. But it's the electric car company Tesla that he's most closely associated with. And it's Tesla's skies-the-limit valuation that helped propel Musk into the richest person on earth stratosphere.
This year, though, the Tesla brand's meteoric valuation has turned south, with the company's stock price dropping by 55%. Worse, the plunge has increased significantly since Musk took over Twitter.
There are lots of reason why a company's stock price can fluctuate, including when the CEO himself sold off almost $40 billion of his shares. But what if it's the company's brand, and more specifically, how the CEO's actions have affected that brand, that's causing the drop in shareholder value?
The Wall Street Journal, Forbes, and Car and Driver, have all done articles demonstrating how Musk's actions could have affected Tesla's brand value.
From auto industry researchers Strategic Vision: “Tesla's brand image is heavily tied to its CEO, Elon Musk,” whose actions “…have had a direct impact on his own image and that of Twitter and Tesla.”
Was that the case back in January of 2022 when Musk called President Joe Biden “a damp sock puppet in human form” and Tesla's brand value plummeted 11%?
From Forbes: Attacks on Biden would be of no consequence if Musk were simply a private citizen or conservative media commentator. But Tesla, the world's most valuable carmaker, has to stay in the good graces of a host of federal agencies, including the Securities and Exchange Commission, the Internal Revenue Service, the National Highway Traffic Safety Administration, the Transportation Department and the Labor Department.”
More recently, Musk's actions on Twitter – restoring banned accounts, eliminating content moderation requirements, supporting QAnon, closing critics' accounts – have not only allowed hate speech to increase on the platform, but have also scared away advertisers who no longer want to be associated with Telsa's brand.
From the WSJ: Tesla's brand “…has been negatively impacted by the Twitter drama. Where before EV buyers were proud to drive their Teslas to their friends or show off Teslas in their driveways, now the Twitter controversy is hurting Tesla's brand equity.”
What's more, Musk's actions seem most likely to alienate the very consumers who were most attracted to Tesla's brand in the first place; green-leaning, affluent, urban Democrats.
From Car and Driver: “Elon seems to be going out of his way to antagonize this core audience. And research shows Democrats' view of Tesla has dimmed lately, while Republicans' opinion of the brand has turned more favorable, although to a lesser degree.”
What does Tesla's public relations team have to say about all this? Nothing. Musk fired them all in 2020.
Perhaps none of these things would have mattered only a few years ago, back before we were so polarized along political lines. But we all know that that ship has sailed.
Also, not too long ago, Tesla was the consumers' only choice if they wanted to drive an electric vehicle. But today, EVs are available from scores of makers, both new and old, including Audi, BMW, Cadillac, Chevrolet, Ford, Genesis, GMC, Hyundai, Jaguar, Kia, Lexus, Lucid, Mercedes-Benz, Nissan, Polestar, Porsche, Rivian, Subaru, Toyota, Volkswagen, and Volvo.
Of course, not only can't consumers name the CEOs of any of those companies, they also don't know their politics. And that's an innovation that Tesla's investors probably wish their company had, too.
Comment *
Although all we truly have is the present moment, the present moment frequently deceives us. We want to make sense of all around us in an instant. We make judgments based on our recent experiences, opinions, and self-interests. Present actions aside and absent an undisclosed medical condition, Elon Musk is still a genius. He is a classic disrupter. He brings significant change to every segment of society in which he engages. He creates change which creates value. Over time the disruption becomes mainstream. Musk’s interest wanes and he looks for the next disruption. Tesla is a great example. The financial gains realized by early investors were great, but that opportunity has passed. Tesla drew competitors into the market for EVs. All existing auto manufacturers have been disrupted by Tesla. New enterprises seeking a share of EV market have come into existence, with some already leaving creating nothing but losses. Tesla has moved from being a market disruptor to simply being a competitor. Musk has moved on.
Musk has created a huge amount of wealth for himself and others, but I don’t believe his intent is wealth creation for either himself or others. An Elon Musk-directed enterprise may well provide great near-term returns for investors but be wary of the long-term.
The current Twitter fracas is more entertainment than either a cultural catastrophe or a current financial opportunity for investors. Twitter investors gained value from Musk’s play. Currently, only Musk, his debt holders, and Twitter employees have possible financial gain and the corresponding risk. Musk’s poll about his continuing as CEO is entertainment. His days as Twitter CEO are numbered not because he took a poll, but because he realizes the Twitter disruption needs to go to another level. The shift to professional leadership will take Twitter out of the daily news cycle and begin the process of creating change and then enterprise value.
Twitter is interesting in that with PayPal, The Boring Company, and Tesla Musk’s target for disruption was an industry. Twitter appears to be different in that the target for disruption is a single high-profile business. Or is it? What is the bigger play? What disruption of the magnitude of Tesla could be created in the communication industry?
Let Musk be Musk.
That’s an interesting thought, Joe. The concept of the “Entrepreneur’s Dilemma” is certainly not a new one. Instead it’s a concept we see repeated over and over again. Perhaps Musk will get lucky enough to find some one like Tim Cook who took Steve Job’s creation and increased its shareholder value exponentially.
Of course, it required that Jobs actually die first. Maybe Musk can learn something from that…?
Really interesting thoughts, Bruce. I’d like to believe that I’m the canary in the coal mine: a liberal centrist of the John McWhorter camp, neither woke nor anti-woke, really–and a delighted investor in Tesla, which I purchased in small quantities between 2015 and 2020, always directly in the face of Schwab’s D and F ratings. I’ve sold some of it in the past two years for between 10x and 25x what I paid for it. (That is not a misprint.) I bought it because I consider, or did consider, Musk to be a genius on the order of Thomas Edison. When the batteries blew up, I just laughed and bought stock–because I had full faith in Elon’s ability to solve that problem and move on.
But here we are. I was in favor of his purchase of Twitter, because although I’m not a free-speech absolutist, I trend heavily in that direction, and like many, I’d been aware that Twitter, like many portions of our elite media/academic/university world, had narrowed the acceptable bounds of free speech in a way that I found constricting. Call me an agnostic on the purchase. But I was fine with it.
What I’m NOT fine with is Elon not only owning Twitter, but imagining that he can also, and simultaneously, run the place as CEO and hold court as chief Tweeter. It’s his tweets that have bit by bit peeled me away from faith in his genius. I don’t know why he thought he thought this was a smart strategy, but it’s not. As coalmine canary, somebody who has profited greatly to this point from his genius and who still holds a fair bit of stock, I’m watching share value fall–and I know that the CEO’s tweets have done that. It’s a shame.
I like your analysis. I’m going to read it again, then read others’ comments.
Your post is full of things I’m happy for Adam:
1. I’m happy that you read my posts and that we stay at least somewhat in touch;
2. I’m happy that you made so much money with your Tesla investments; and
3. I’m happy that our outlooks seem to be rather similar (gives me hope that maybe my musical chops can come close to emulating yours one day as well!!).
What I find so interesting about the Tesla shareholder value debacle is how the stock price is not related to the performance of the cars or even the company.
Rather I find it amazing how Musk’s comments were able to almost totally distract everyone from the benefits (or defects) of the car itself.
In my books and my talks I try to show how brand value can have little to do with the actual functional values of the product itself. Musk’s public comments and management of a different company provoking a drop in Tesla’s stock price will become one of my case studies; it proves, once again, that Perception IS Reality.
Here’s at least one positive I think it may have been hard for Musk to see this backlash thing so we shall see if he’s smart enough to unwind the mess
So….. being it’s the Holidays we should look for any positives as year end approaches…
“Elon Musk’s SpaceX has reached a deal with Ukraine to send the country over 10,000 more Starlink antennas, according to Bloomberg. The low latency, broadband systems will provide high-speed internet to Ukraine and will also help counter Russian air attacks. The new terminals being delivered to the country add to the 22,000 already received since the Russian invasion began, which are being employed to stabilize connections during critical moments. Since the war broke out in February, Russia has been targeting crucial infrastructure. Ukraine is preparing for a potential scenario where power, heating and water supplies could be cut off for several days.
I used to regard Musk as being ultra bright (and a bit intolerant of the merely bright) and very highly driven to achieve. But, his recent antics seem to reveal him to be far too childishly immature to be allowed to shoot from the hip when such substantial corporate fortunes are at stake. His rants have probably destroyed more stock value than could have ever been imagined in the time of Ford, Porsche and Ferrari, who actually created car companies. Mary Berra comes to mind when I think of a CEO.
Your closing paragraph sums up the situation for shareholders perfectly. Musk’s public perception has gone from a brilliant entrepreneur to a billionaire bully.
Since when does everything & everyone’s comments make a difference???
Who cares and since when are you the book of knowledge…
Go play harmonica some place and forget about blogging.
Opinions are like ass wholes everyone’s got one
Thanks for your input Saurio. I believe the actual saying is: “Opinions are like assholes. Everyone has one and they all stink.”
Great article. Very thought provoking!
I will share it. Thank you.
Great piece. What will the future bring and how will it end? Difficult to see growing future for Tesla or Musk.
Great question! I keep asking myself the same question and hope (cause for a while I thought Musk was brilliant) that maybe there is a deeper strategy that I’m to dumb to recognize going on here and soon the light of illumination will shine and I’ll see the light. But damned if I get it. To that point…I was considering a Tesla – I like EV’s – and the other day my wife (who got major turned off by Musk) asked: “Are you going to buy a Tesla?” I replied that I was thinking about it. She then offered this advice, “I don’t care if you by an EV, just DON’T BUY A TESLA!” Message received. So I’m looking at Mercedes. Sorry Elon.
We had the exact same experience, Chuck. My wife looked at Tesla’s EVs and bought an Audi EV instead.