Can Elon Musk survive at Tesla in the wake of his Twitter disaster?

Tesla Model 3

(UPDATED FROM 12/19/2022)

The plummeting price of Tesla stock this week has given more potency to the question: Can Elon Musk maintain his leadership role at the automaker? Or has he so damaged his own “brand” by a disastrous takeover of Twitter that he will be forced out by nervous board members and investors?

Earlier this week Musk stated that he will step down as Twitter CEO “as soon as I find someone foolish enough to take the job!” (Isidore, 2022). However, Josh Marshall (2022) quite rightly noted that Musk will still own Twitter unless he is able to sell it, most likely at a huge loss. A new leader “will just take the fall.”

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I wonder who would want the job, particularly given Musk’s erratic behavior and penchant for micromanagement. Just as importantly, how would a change in leadership help Musk if Twitter is still perceived as biased toward right-wing politicians and causes?

Even if Musk sold off Twitter tomorrow, he would still be confronted with increasingly ominous problems at Tesla. For example, demand in the U.S. is weakening to the point where Tesla announced on Thursday a rebate of $7,500 (Isidore, 2022). In addition, even if Musk never tweeted another political rant, he may have already scared off more than a few Democrats from buying a Tesla as long as he is so closely associated with the car brand.

Tesla stock prices NASDAQ
As of the close of trading on December 23, Tesla stock had fallen to $123. This represented a 44 percent decline since Musk bought Twitter in October (Isidore, 2022; graph courtesy NASDAQ, 2022).

Could Tesla still grow as a ‘partisan brand?’

During 2022 Tesla has been losing EV market share. “The growing number of compelling EV alternatives is a key reason why,” noted Brad Anderson of Car Scoops (2022). “However, some analysts believe that Elon Musk’s takeover of Twitter and embrace of some Republican rhetoric could put off some buyers in liberal states like California.” 

A Morning Consult survey in November found that Tesla’s favorability rating had fallen from 43 percent in January 2022 to 38 percent by the end of November. More alarmingly, Tesla’s favorability among Democrats dropped from 24.8 percent in October to only 10.4 percent in November. Favorability among Republicans only increased from 20 percent to 26.5 percent during that time (Duberstein, 2022).

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Meanwhile, a YouGov survey “found that self-described liberals now view Tesla more negatively than conservatives, although conservatives also have a negative view of Tesla on average.” This illustrates how Tesla is becoming a “partisan brand” because people “have issues separating Tesla and Elon Musk,” argued Fred Lambert (2022) of Electrek.

Billy Duberstein (2022) of The Motley Fool suggested that Tesla might have a hard time compensating for lost sales from Democrats in a large market like California because “the economic advantage of buying a more expensive electric vehicle (EV) isn’t as great in Republican-leaning states.”

Tesla Model 3

Musk’s politics may play somewhat differently abroad

In assessing Tesla’s future prospects, it should be remembered that the automaker now has an international footprint that lessens its dependence on the U.S. market. For example, Tesla operates a major factory in China, which is the world’s biggest market (Statista, 2022). Would very many potential Chinese customers care — or even know — about Musk’s views on U.S. politics?

Tesla’s prospects may be more difficult to assess in Europe, where the automaker has been ramping up production at a German plant. In September the Model Y was the top-selling car in Europe, but this could be a short-term blip.

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Many automakers have suffered more from supply-chain issues and Tesla’s European sales have tended to peak at the end of quarters (Bloomberg, 2022). Can Tesla sustain its momentum as legacy automakers introduce a broader range of EVs, particularly in light of Telsa’s fairly low initial-quality ratings (Shakir, 2022)? And might Musk’s political right turn give pause to more liberal European car buyers who follow American politics?

Perhaps, but would it be enough to spook Tesla’s board and investors if overall global sales continue to climb . . . or at least hold steady?

Tesla Model S taillight

Investors appear to be split on what Musk should do

A recent Washington Post article noted that some investors have been concerned that Musk is “stretched too thin” and should focus more on Tesla (Siddiqui and Lerman, 2022). However, the automaker’s third-largest investor, Leo KoGuan, has raised the question of whether Musk has become too political to continue running a car company (Lambert, 2022):

“Elon has moved on permanently I think from Elon the engineer par-excellent to Elon the supreme political king-maker. Based on this assumption, only based on this assumption, Elon should find his own successor approved by independent BOD members. Of course, BOD should set up an independent search committee to find a new CEO.”

Musk does not seem to be discouraging folks from thinking that he has a new passion. For example, in a recent Twitter exchange he stated that his political activities ranked No. 1 on his list of priorities (Siddiqui and Lerman, 2022). And this week he tweeted more attacks against Democratic policies, such as on border security (Musk, 2022).

Also see ‘Elon Musk’s infamous interview: What the auto media missed’

Perhaps on some level Musk realizes he is no longer the right kind of leader for Tesla now that it has moved past the startup phase. The Truth About Cars commentator Patrick (2022) may be onto something when he suggested that Musk’s swashbuckling approach is “useful during the creation of the business” but at a certain point “someone else will always be better to manage the growth.”

NOTES:

This story was originally posted Dec. 19 and was updated Dec. 23.  

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