NEW YORK (AP) — Elon Musk has earned titles such as Moonshot Maestro, The Edison of Our Era, and Futuristic Designer, yet he faces a significant issue at his automobile firm, and it remains uncertain whether he can resolve it: harm to its reputation.
Tesla’s sales have declined significantly due to protests and boycotts stemming from Musk’s alignment with extreme right-wing ideologies. The company has seen profits cut down by more than half this year, and competitors from China, Europe, and the U.S. are capitalizing on this situation.
Tuesday brought some respite when Musk declared during an earnings call for investors that he plans to reduce his involvement in the government cost-reduction role in Washington to just “a day or two each week,” allowing him to concentrate more on his former position at the helm of Tesla.
On Wednesday, investors caused Tesla’s stock price to rise by 5%, despite numerous obstacles still looming.
Who wants a Tesla?
Musk seemed to downplay the role that brand damage played in the drop in first-quarter sales on the investor call. Instead, he emphasized something more fleeting — an upgrade to Tesla’s best-selling Model Y that forced a shutdown of factories and pinched both supply and demand.
Although financial experts tracking the firm have observed that possible purchasers likely refrained from buying as they awaited the enhancement, which negatively impacted outcomes, even those who hold the most optimistic views acknowledge that the harm to the brand’s reputation is significant and concerning.
This is a fully escalated crisis,” stated Dan Ives from Webush Securities, typically optimistic, earlier this month. In a client memo, JP Morgan cautioned about “unparalleled harm to the brand.
Musk’s perspective on the demonstrations
Musk downplayed the objections raised against Tesla during the conference call, attributing them to individuals upset with his role in overseeing the Department of Government Efficiency. He stated, “Those benefiting from corruption and mismanagement want it to persist.”
However, the demonstrations across Europe, located thousands of miles away from Washington, followed Musk’s support.
far-right politicians
There you have it. Furious Europeans staged hangings-in-effigy of Musk in Milan, displayed his image making a stiff-armed gesture onto a Tesla plant wall in Berlin, and posted banners in London discouraging purchases of “Swastica-cars” under his brand.
Sales in Europe have plummeted by 39% during the initial quarter of this year — a dramatic decline. Specifically, in Germany, there was an astonishing drop of 62%.
A concerning development emerged on Tuesday when Tesla withdrew its previous commitment that sales would rebound this year following their first decline in twelve years during 2024. The company cited uncertainty in the global trade landscape as the reason and chose not to reaffirm the prediction.
Here come the rivals
In the meantime, Tesla’s rivals are poaching its customers.
Among its fiercest rivals now is Chinese giant BYD. Earlier this year, the EV maker announced it had developed an electric battery that can
charge within minutes
And Tesla’s competitors in Europe have started unveiling new models equipped with cutting-edge technology, positioning themselves as viable alternatives to Tesla. This shift coincides with growing skepticism towards Elon Musk among the public.
Tesla’s percentage of the electric vehicle market in the U.S. has decreased from
two-thirds
to
less than half
, as reported by Cox Automotive.
Pinning hopes on cybercabs
Another competitor, Google’s parent company Alphabet, is already outpacing Tesla in a sector where Musk has pledged significant advancements that could transform his firm: autonomous taxis.
One of the standout moments during Tesla’s conference call on Tuesday was when Musk reaffirmed his earlier forecast that the company expects to achieve certain targets.
aunch driverless cabs
without steering wheels and pedals in Austin, Texas, in June, with plans to expand to other cities shortly afterward.
But Google’s service, called Waymo, already has logged
millions of driverless cybercab trips
in San Francisco, Phoenix, Los Angeles, and Austin as part of a partnership with ride-hailing leader Uber.
A future without drivers for Tesla owners?
Musk informed analysts that the self-driving feature would be accessible for Tesla cars currently in use via wireless software upgrades. He set a timeframe stating, “By the latter part of this year, we expect millions of Teslas to be navigating autonomously.”
However, he has previously made comparable pledges but failed to meet his deadlines, like in
April 2019
When he pledged complete automation by the end of the subsequent year, he reiterated this forecast multiple times over the coming years, each time advancing the deadline.
The main issue is that federal investigators haven’t confirmed yet that Tesla cars can operate entirely autonomously without safety concerns. Other issues persist as well.
probes
, safety regulators are looking into Tesla’s so-called Full Self-Driving, which is only partial self-driving, for
it’s tied to accidents occurring in poor visibility conditions
like when there is sun glare.
On the positive side
In competition with rivals in the U.S., Tesla currently has one clear advantage: It will get hurt by less by tariffs because most of its vehicles are built in the countries where they are sold, including those in its biggest market, the U.S.
“Tariffs are still tough on a company where margins are still low, but we do have localized supply chains,” Musk said Tuesday. “That puts us in a strong position.”
The firm additionally stated that a more affordable variant of its top-selling car, the Model Y SUV, would be available to buyers in the initial six months of this year. This move has the potential to increase their sales numbers.
An additional advantage: The firm experienced remarkable growth during the initial quarter in its energy storage sector. Furthermore, Musk has pledged to have produced 5,000 Optimus robots, which is part of Tesla’s operations, by year-end.
Pricey stock
Despite dropping almost 50% since its peak in December, Tesla’s stock remains highly valued when considering the most important metric over the long term: its profits.
Given that it’s trading at over 110 times its projected earnings per share for this year, the stock is valued at more than 25 times higher compared to General Motors. In contrast, the typical company within the S&P 500 index has a valuation of under 20 times its earnings.
This gives Tesla very little room for mistakes if anything goes awry.
