Tesla’s ‘code red situation’ is obscured by forms of denial

April 23, 2025 Steve Current Events 0

Tesla’s automotive operations are facing a moment of truth — but all too often it has been obscured by forms of denial.

Automotive News (2025) illustrates how this has played out in the media. A recent unsigned editorial called upon Elon Musk to either focus more attention on Tesla or “appoint someone else to lead the company on a day-to-day basis — an automotive equivalent to Gwynn Shotwell, the COO who has long kept a steady hand on SpaceX.”

While it is possible that Tesla might benefit from such a move, it misses what strikes me as the bigger problem: Musk’s political activities have been highly unpopular with a goodly portion of the automaker’s customer base.

In anticipation of Tesla’s first-quarter earnings call, Wedbush analyst Dan Ives offered a darker take, arguing that Musk faced a “code red situation” that required him to step back from his political activities and refocus on Tesla’s core business (Boughedda, 2025).

Ives argues that Tesla is starting a ‘new chapter’

Ives predicted that even if Musk took his advice in full, Tesla has become such a polarizing “political symbol globally” that the automaker may still sustain “potentially 15%-20% permanent demand destruction for future Tesla buyers.” Even so, Ives was still bullish on Tesla because it is one of “the most disruptive technology companies on the globe” (Boughedda, 2025).

During the earnings call Musk announced that he would reduce his involvement in the Trump administration. Ives described this “as an off-ramp” from Musk’s leadership of the Department of Government Efficiency, better known as DOGE.

“He addressed it head on — he read the room,” Ives stated in a Bloomberg video segment. “This was a fork in the road; a moment of truth.” He added, “I believe now this is a new chapter and it leaves a dark chapter in the past” (Bloomberg, 2025).

A new chapter or merely toning things down?

Ives’ optimism is questionable partly because Musk said that he may not step away completely from DOGE until President Donald Trump’s term ends in 2029.

“I’ll have to continue doing it for, I think, probably the remainder of the president’s term, just to make sure that the waste and fraud that we stop does not come roaring back, which will do if it has the chance,” Musk reportedly stated on the earnings call, adding: “I think I’ll continue to spend a day or two per week on government matters for as long as the president would like me to do so and as long as it is useful” (Wolf, 2025).

In addition, Musk did not address whether he would continue his involvement in numerous other political involvements, which include a constant flow of often provocative posts on X, the social-media company he owns.

Nor did he address his future involvement in elections, both in terms of campaign donations as well as public statements — in the U.S. and abroad.

Tesla’s political problems transcend the United States

As a case in point, in the lead up to Germany’s elections in February, Musk threw his support to the AfD party even though it has been classified as a right-wing “extremist” group by the nation’s domestic intelligence service (Le Monde, 2025).

In addition, last month Musk reposted a tweet on X that stated, “Stalin, Mao and Hitler didn’t murder millions of people,” but rather, “their public sector workers did” (Brad Anderson, 2025).

Also see ‘Jay Leno gives Tesla a helping hand in its time of need’

In light of Germany’s history, should we be surprised that Musk’s words and actions have elicited a public backlash — and that Tesla sales fell 62 percent in the first quarter of 2025 (Fleck, 2025)? This is despite electric-vehicle sales increasing by 35 percent over the previous year (Borras, 2025).

Perhaps the most useful part of the above-mentioned Automotive News editorial (2025) was its acknowledgement that Musk “is an extreme case study of why CEOs don’t usually get involved in politics: It drives away customers and distracts from what is actually a very difficult and important job.”

Musk still disses his traditional customer base

Another sign that Musk is not meeting the moment is his sharp dismissal of those who have protested at Tesla dealers against DOGE. In the earnings call he argued that the protesters are “paid for” by those “receiving fraudulent money or that they are the recipients of wasteful largesse” (Lambert, 2025).

In a fact check of the earnings call, Fred Lambert (2025) noted that Musk provided “no evidence of that whatsoever . . . it’s very delusional.”

Opinion polls have consistently shown that Musk’s handling of DOGE has been unpopular. For example, a recent Quinnipiac University poll found that 57 percent of voters think that Musk has had too much influence over major decisions in the Trump administration (Singh, 2025).

It also strikes me as rather cheeky for Musk to complain about the role of money in politics when he donated more than $291 million in the 2024 election cycle to Republican candidates, political action committees and other activities. According to OpenSecrets, “he was, by far, the biggest political donor” (Meyers, 2025).

Does Tesla’s future depend on Democrats — and Musk?

It is hard to see how Tesla will rehabilitate its reputation with Democratic-leaning voters when Musk is so closely associated with the brand. A recent poll by the EV Politics Project found that even though Democrats are far more likely than Republicans to buy an EV, Musk’s unfavorability numbers have grown 30 points to 76 percent compared to polling from November 2023 (Nieves, 2025).

Given all this, why does Ives think that Tesla could have only 15%-20% permanent demand destruction? For example, in the U.S. does he expect Republicans to make up for lost popularity with Democrats? If not, is Ives assuming that future car buyers will forget about DOGE’s role in cutting services they consider important?

Also see ‘Does Automotive News have a realistic plan for fighting Trump’s tariffs?’

I wouldn’t bet on that. The Democrats have found Musk to be more unpopular than Trump, so they may point to him in the 2026 mid-term elections as the poster child for how oligarchs have gained too much power in U.S. politics (McHardy, 2025). Meanwhile, Musk has become fodder for the late-night comedians.

How is this a sustainable situation for Tesla? Ives’ response in his whirlwind media tour has been to insist that “Musk is Tesla and Tesla is Musk” (ABC News, 2025).

Lambert (2025) disagreed, arguing that Musk refocusing on Tesla won’t be “as good of a thing as people think.” He summed up the earnings call as “smoke and mirrors” designed to boost the stock — but noted that so far it was working.

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