Headlines about a new report draw the wrong conclusions about what caused Tesla’s weak sales quarter and stock decline.
Whoever runs PR for Caliber, the brand reputation consultancy, deserves a raise or at least a nice bottle of Scotch. Last week, a new “In tech we trust?” report from Caliber came out that contextualizes Tesla’s reputation among those of its Big Tech peers: Amazon, Apple, Facebook, Microsoft, Uber, etc.
It provoked a flurry of headlines (hence the Scotch), including:
- “Would-be Tesla buyers snub company as Musk’s reputation dips” (Reuters)
- “Elon Musk’s reputation is probably turning buyers off Tesla, analysts say” (Business Insider)
- “Buyers are avoiding Teslas because Elon Musk has become so toxic” (Futurism)
The Reuters article came first; the others piled on. All either contained or alluded to this provocative (albeit carefully worded) sentence:
“It’s very likely that Musk himself is contributing to the reputational downfall,” Caliber CEO Shahar Silbershatz told Reuters, saying his company’s survey shows 83% of Americans connect Musk with Tesla.
This is nonsense.
Long-time Dispatch readers might be surprised to see me say this. I am a Tesla owner who would not buy another Tesla because of Elon Musk’s politics, so I am exactly the kind of person that Silbershatz (which is a fantastic name that I defy you to say out loud quickly three times in a row—it might summon Beetlejuice) is talking about.
If I was the kind of guy who put bumper stickers on cars, I might get one that says, “Bought it before we knew how awful he is,” or one of the variants.
Furthermore, this is the tenth article in an intermittent series that I’ve written in two years about Musk, his purchase of Twitter, and the hijinks that followed. Throughout, my thesis has been that Musk doesn’t really have any politics: his embrace of the MAGA world and crusade against “the woke mind virus” are amoral head fakes. He wants to make buying an EV, and specifically a Tesla, thinkable for conservative Americans who might otherwise refuse to do so because only lefty liberal snowflakes like Ed Begley, Jr. and me buy electric cars. If Musk positions himself as a fellow traveler in the red pill world, I’ve argued, then he has opened a new market for Tesla right here in the USA.
So… why don’t I think that Musk’s toxic behavior is what has led to Tesla’s worst sales quarter and 34% stock decline, even though that idea is delicious?
I have four reasons.
1. Tesla had nowhere to go but down: for more than a decade, Tesla had no competition. It was the only EV with style and a range of more than 200 miles. (The original Nissan Leaf, for example, had a range of about 100 miles that declined as the cars aged.) It was also the only EV that could claim to be a luxury car.
Today, on the luxury side, Cadillac has the Lyric, BMW has the i series, Mercedes has the EQS, among others. On the less expensive side, Hyundai has the Ioniq, Subaru has the Soltera, and Kia has the EV6, among others. (Netflix was in a similar happy position before the launch of Disney+, MAX, Paramount+, etc.—it’s still the biggest streamer, but it’s no longer the only.)
Plus, outside of the peculiar Cybertruck, Tesla hasn’t launched a new model or significantly refreshed its old models in years, so car buyers who want the hot new thing are unlikely to look at Teslas.
2. American interest in EVs is in a cyclical decline: according to Cox Automotive (quoted in this piece from Fast Company), Americans bought fewer EVs this quarter than in any quarter since 2020. Range anxiety is real, and despite Musk’s MAGA-hugging efforts EVs have become a political issue during this election year.
This will change once the election—regardless of the winner—is in the rear-view mirror, and particularly as more state governments crack down on gas cars. California, Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island, Vermont, and Washington, are all likely to ban the sale of new gas cars by 2035.
3. Americans understand that Musk, Tesla, and X aren’t identical: Musk has almost 180 million followers on X, and he uses that direct line to promote everything from the most recent SpaceX launch to any number of baseless conspiracy theories. However, that doesn’t mean that Americans confuse Musk with any of his companies.
Caliber’s own data shows this. If you look at the carousel in the “Reputation matters” section of the report, you’ll see that X (formerly Twitter) hugs the bottom in nine out of 10 attributes (e.g., innovation, integrity, leadership). In each case, Tesla is higher, sometimes remarkably higher, than X (e.g., 72% vs. 55% for offering and 61% vs. 78% for innovation). If Americans conflated Musk, Tesla, and X, then these differences wouldn’t be there.
4. The headlines don’t talk about politics: When my friend Peter Horan first texted me the Futurism article, my immediate response was, “the unaddressed question is the political affiliation of those surveyed.” None of the articles dug into how the decline in Tesla sales connects to the political bias of the respondents. However, if they had dug into the Caliber report, they would have seen this:
I did the math: Musk scores an average of 29 percentage points higher with Republicans than Democrats. This does not directly address the question about whether Republicans are more likely to consider buying a Tesla than Democrats, but it is a strong hint. (I suspect that Caliber had that data but chose not to share it because it would have resulted in fewer juicy headlines.)
Correlation isn’t causation… even when we really want it to be.
If Musk’s toxicity were the direct cause of Tesla’s current decline that would be delightful. It is a plausible story, particularly for people who lean left and for people who believe in things like justice and karma.
However, as Behavioral Economists have taught us, there’s a lot of daylight between a plausible story and a probable one. Tesla’s current woes are due to macroeconomic factors, a lack of EV infrastructure, and heightened competition.
Which is just too damn bad.
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