Musk damaged Tesla's brand in just a few months. Fixing it will likely
take longer
[April 24, 2025] By
BERNARD CONDON
NEW YORK (AP) — Elon Musk has been called a Moonshot Master, the Edison
of Our Age and the Architect of the Future, but he's got a big problem
at his car company and it's not clear he can fix it: damage to its
brand.
Sales have plunged for Tesla amid protests and boycotts over Musk's
embrace of far right-wing views. Profits have been sliced by two-thirds
so far this year, and rivals from China, Europe and the U.S. are
pouncing.
On Tuesday came some relief as Musk announced in an earnings call with
investors that he would be scaling back his government cost-cutting job
in Washington to a “day or two per week" to focus more on his old job as
Tesla's boss.
Investors pushed up Tesla's stock 5% Wednesday, though there are plenty
of challenges ahead.
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.
While financial analysts following the company have noted that potential
buyers probably held back while waiting for the upgrade, hurting
results, even the most bullish among them say the brand damage is real,
and more worrisome.
“This is a full blown crisis,” said Wedbush Securities' normally upbeat
Dan Ives earlier this month. In a note to its clients, JP Morgan warned
of “unprecedented brand damage."
Musk's take on the protests
Musk dismissed the protests against Tesla on the call as the work of
people angry at his leadership of the Department of Government
Efficiency because “those who are receiving the waste and fraud wish it
to continue.”
But the protests in Europe, thousands of miles from Washington, came
after Musk supported far-right politicians there. Angry Europeans hung
Musk in effigy in Milan, projected an image of him doing a straight-arm
salute on a Tesla factory in Berlin and put up posters in London urging
people not to buy “Swasticars” from him.
Sales in Europe have gone into a free fall in the first three months of
this year — down 39%. In Germany, sales plunged 62%.
Another worrying sign: On Tuesday, Tesla backed off its earlier promise
that sales would recover this year after dropping in 2024 for the first
time a dozen years. Tesla said the global trade situation was too
uncertain and declined to repeat the forecast.
Here come the rivals
Meanwhile, Tesla's competition is stealing 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 European rivals have begun offering
new models with advanced technology that is making them real Tesla
alternatives just as popular opinion has turned against Musk.
Tesla's share of the EV market in the U.S. has dropped from two-thirds
to less than half, according to Cox Automotive.
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Tesla and SpaceX CEO Elon Musk walks to the stage to speak at the
Butler Farm Show, Oct. 5, 2024, in Butler, Pa. (AP Photo/Alex
Brandon, file)
 Pinning hopes on cybercabs
Another rival, Google parent Alphabet, is already ahead of Tesla in
an area that Musk has promised will help remake his company:
Cybercabs.
One of the highlights of Tesla’s call Tuesday was Musk sticking with
his previous prediction that it will l aunch driverless cabs without
steering wheels and pedals in Austin, Texas, in June, and in other
cities soon after.
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 driverless future for Tesla owners?
Musk also told analysts that this driverless capability will be
available on the Tesla vehicles already on the road through software
updates over the air, and put a timeline on it: “There will be
millions of Teslas operating autonomously in the second half of the
year."
But he has made similar promises before, only to miss his deadlines,
such as in April 2019 when he vowed full automation by the end of
the next year. He repeated the prediction, moving up the date,
several more times, in following years.
A big problem is federal investigators have not given the all-clear
that Tesla vehicles can drive completely on their own safely. Among
other probes, safety regulators are looking into Tesla's so-called
Full Self-Driving, which is only partial self-driving, for its tie
to accidents in low-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 company also reconfirmed that a cheaper version of its
best-selling vehicle, the Model Y sport utility vehicle, will be
ready for customers in the first half of this year. That could help
boost sales.
Another plus: The company had a blow out first quarter in its energy
storage business. And Musk has promised to be producing 5,000
Optimus robots, another Tesla business, by the end of the year.
Pricey stock
Even after falling nearly 50% from its December highs, Tesla's stock
is still very richly valued based on the one yardstick that really
matters in the long run: its earnings.
At 110 times its expected per share earnings this year, the stock is
valued more than 25 times higher than General Motors. The average
stock on in the S&P 500 index trades at less than 20 times earnings.
That leaves Tesla little margin for error if something goes wrong.
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