Collapse of Tesla's customer loyalty following Musk's support for Trump, as demonstrated by data
Tesla, the U.S. electric-vehicle sales leader, has been experiencing a decline in customer loyalty, according to data from S&P. Until recently, Tesla was acquiring nearly five new households for every one it lost to another brand. However, this trend changed in July 2024, with the company gaining fewer than two households for every one it loses to the rest of the industry.
Brands that now attract more Tesla customers than they lose include Rivian, Polestar, Porsche, and Cadillac. This shift has been observed despite Tesla's continued dominance in the U.S. electric-vehicle market.
The decline in Tesla's customer inflow can be attributed to several factors. One of the key contributors is Elon Musk's political involvement, particularly his creation of the new "America Party" and public political activities. S&P's analysis of vehicle registration data shows that more than 60% of Tesla-owning households bought another Tesla for their next car purchase from Q4 2021 to Q3 2022. However, this rate has been on a steady decline since then.
Elon Musk's political announcements have had a noticeable impact on Tesla's stock price. For instance, a 7% fall was recorded after he announced the America Party, and a general drop of over 5.6% was observed in a recent five-day period. This stock volatility, along with shareholder concerns about Musk's political activism distracting him from focusing on Tesla's operations, raises doubts about his ability to lead the automaker effectively.
Musk's antagonism toward political figures and involvement in polarizing political debates may be perceived negatively by portions of Tesla’s customer base, creating potential brand risks in a politically divided U.S. market. Despite these concerns, Musk has rejected calls for Tesla’s board to limit his political activities, intensifying concerns about oversight and corporate governance that could translate into customer and investor skepticism.
The timing of Tesla's declining brand loyalty suggests that Musk's political involvement may have turned off customers in Tesla's eco-conscious customer base. Tesla's aging model lineup faces increased competition from a variety of EVs from legacy automakers such as General Motors, Hyundai, and BMW. The only new model Tesla has released since 2020, the Cybertruck, has been a flop despite Elon Musk's prediction of hundreds of thousands of annual sales.
Despite these challenges, Tesla remains optimistic about its future. Brian Mulberry, a client portfolio manager at Tesla investor Zacks Investment Management, expects enormous profits from Tesla's plans to operate robotaxis and license self-driving technology to other automakers.
In summary, Elon Musk’s heightened political involvement has caused stock volatility, shareholder concern, and potential reputational risks that likely undermine Tesla’s customer loyalty in the U.S. However, precise quantification of changes in customer loyalty is not available in the current sources. The decline in Tesla's customer loyalty rate, coupled with the company's challenges in maintaining its market dominance, presents an interesting narrative for the future of the electric-vehicle industry.
References:
- Bloomberg
- CNBC
- The Verge
- Reuters
- S&P Global Mobility
- Elon Musk's political actions, such as his creation of the "America Party" and subsequent public activities, have led to a decline in Tesla's customer loyalty.
- Brands like Rivian, Polestar, Porsche, and Cadillac are attracting more Tesla customers than they are losing, signifying a shift in the automotive market.
- The decline in Tesla's customer inflow can also be linked to Musk's antagonistic stances and involvement in polarizing political debates, which may negatively affect certain segments of the company's customer base.
- Even as Tesla faces challenges in maintaining its dominance in the electric-vehicle market due to increased competition and a faltering Cybertruck launch, the company continues to express optimism for the future, particularly with plans for robotaxis and self-driving technology licensing.
