CNN
—
Elon Musk says he’s going back to Tesla. The question now is whether or not its too late to reverse the damage that’s been done.
Musk told investors on Tuesday night he would step back from his role running the Department of Government Efficiency (DOGE) next month, spending only one or two days a week there. He said he would spend the freed up time running Tesla.
But even if Musk devotes more time to the now troubled company, it’s clear that his high profile support of President Donald Trump and controversial role at DOGE has already cost Tesla. There have been protests outside showrooms and vandalism at its facilities. Earlier this month, the automaker reported the biggest drop in sales in its history during the first quarter as buyers fled the brand. And that damage could be long lasting, even according to some of his fans.
Some Tesla bulls are predicting his pullback from DOGE will be enough to help the company avoid further problems. Shares of Tesla (TSLA) were up more than 3% in early trading Wednesday, even after the electric automaker reported a 71% plunge in net income due to tumbling sales around the globe.
But even Wedbush Securities’ Dan Ives, long known as one of Tesla’s most prominent optimists on Wall Street, said that sales demand will be down 10% permanently due to Musk’s political profile.
“The brand damage caused by Musk in the White House/DOGE over the past few months will not go away just by this move and some of the damage will be stained forever in Europe and the US,” he said in a note to clients early Wednesday.
Musk on Tuesday dismissed the idea that there had been any brand damage due to his controversial political activities, blaming the protests – without any proof – on paid protestors. He suggested the company’s record drop in sales was due to macro economic issues and uncertainty on the part of car buyers.
But other automakers reported a rise in sales in the quarter, especially with their own electric vehicles. And Tesla CFO Vaibhav Taneja did acknowledge the pushback.
“There has been a lot of speculation as to the reasons for decline of our vehicle deliveries in first quarter,” he said. “The negative impact of vandalism and unwarranted hostility towards our brand and our people had an impact in certain markets.”
And Ives told CNN that the drop in Tesla sales is what prompted Musk to announce he was pulling back from DOGE.
“There’s no way to deny what just happened this quarter, whether he admits it or not,” he said.
Brand damage is ’100% irreversible’
The damage to the Tesla brand by Musk may be far greater than Ives and other bulls admit.
“This idea that he’s focused on Tesla, so it’s sales are going to pick up are complete garbage,” said Gordon Johnson of GLJ Research, one of Tesla’s harshest critics on Wall Street.
Johnson said Musk has done permanent damage among liberal buyers who were the natural market for Tesla’s electric vehicles due to their concerns about the environment. He added that there was a drop in demand even before Trump’s election and Musk’s public support for him.
Tesla sales started to decline in early 2024 after Musk moved to allow Nazi sympathizers back onto his social media platform, X, and posted about some of his own far-right positions. That activity isn’t likely to end, even if Musk never visits the Oval Office again, according to Johnson.
“The damage that he’s done is 100% irreversible,” he said.
Some supporters of Trump may be more inclined to buy Tesla than there were in the past, but that’s not enough to make up for the loss of sales to liberal buyers, said Kelly O’Keefe, founder of branding consultant Brand Federation.
He calls what Musk has done to the Tesla brand in recent years “brand homicide.”
“You’ve got the decline of fortunes at Tesla even before the DOGE era,” O’Keefe said. “It was a brand that was built around the imminent threat of climate change, a symbol of concern for the environment.”
Now, he says, the brand is in a tail spin.
“It was a brand people were proud to own,” he added. “I don’t know how you take the stain off of Musk’s behavior.”
