What do you do when your best asset turns into your greatest liability?
That’s the conundrum suddenly facing Tesla investors following a global backlash against the antics of its chief executive, Elon Musk.
From protests at more than 50 Tesla showrooms across the United States last weekend, and bumper stickers on Australian Teslas from embarrassed owners, to cheeky UK bus stop advertisements critical of Musk — the criticism and condemnation appears to be gathering pace.
Protesters have gathered outside Tesla showrooms brandishing signs, like this one in Seattle. (Reuters: David Ryder)
Ordinarily, for someone so cosseted by fame and fortune, criticism from the masses wouldn’t be worth worrying about.
But in this case, the global pushback is starting to directly impact the Tesla business — and, by extension, Musk’s individual net worth.
Tesla’s share price has plummeted in the past few weeks as the company’s sales have slumped in Europe and Australia, while shipments from China have taken a massive dive.
He is still officially be the richest man on the planet by a huge margin.
But Musk’s personal wealth has suffered a $US120 billion hit from the mid-December share price peak.
Tesla share price takes a U-turn
Between election day on November 5 and the peak in the middle of December, Tesla stock soared an incredible 91 per cent.
The rally was propelled by what many believed would be the opportunities Musk’s perceived influence over incoming president Donald Trump would present the business.
Since then, the gains have all but evaporated.
Tesla and Musk are back to square one, except he now is caught in a pincer movement — between an increasingly hostile customer base, and a sudden lift in competition from Chinese and European rivals.
No longer number one
How much of the sudden reversal of fortunes is down to operational issues, and how much is the result of reputational damage is difficult to calibrate at this early stage.
But, according to Morningstar’s American based auto analyst Seth Goldstein, there’s no doubt Musk’s political posturing has become an issue.
“Musk thinks he can say anything he wants to and doesn’t think Tesla will suffer any consequences,” he told the Associated Press this week.
“Tesla was in the sweet spot. Now it has competition.“
Domestically, the Tesla boss’s zeal in slashing America’s government spending, in the process sacking thousands of public servants, has created a furore.
Protesters have objected to Musk’s political views and cuts to the American public service. (Reuters: Eduardo Munoz)
But his incursion into ultra-right wing politics and his dabbling in European election campaigns has caused offence in Europe and a backlash across the globe.
Customers are abandoning the brand.
In Germany, where Nazi-style salutes are considered particularly abhorrent, sales dropped 76 per cent in February, adding to a disastrous 60 per cent plunge in January.
While not quite of the same magnitude, the dire performance was replicated across the Continent, with thumping sales drops in The Netherlands, Sweden, Norway, Denmark, France, Italy, Spain and Portugal.
Shipments from China were almost as bad, down 49 per cent in February from the previous year, a sharp drop from January.
Here in Australia, Tesla’s sales performance was abysmal, dropping 72 per cent in February from the same month last year.
While the company has partly blamed the Lunar New Year falling over January and February and retooling for model upgrades, it has begun to feel the squeeze from rivals such as China’s BYD.
BYD is rapidly expanding its sales globally and has just overtaken Tesla as the world’s biggest producer of electric vehicles.
Until now, Tesla was seen as the undisputed leader and its extreme market valuation — which even in its infancy was higher than that of a combined Ford, General Motors, Chrysler and Toyota — seemed destined to be forever locked into place.
That’s no longer the case. It now has to compete, just like an ordinary car manufacturer rather than a conduit to the future.
For the past two years, Tesla has been trying to maintain market dominance by continually cutting the price of new vehicles.
While that strategy initially spurred demand, it last year began to weigh on potential owners who fretted about resale values and held back.
Now they appear to be looking for alternatives.
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Alienation in an alien nation
A UK activist group called Everyone Hates Elon has owned up as the force behind the bus shelter posters, depicting Musk as a throwback to 1939.
Operating under the mantra of “Let’s Make Billionaires Losers Again”, the group has struck a chord with many in the community.
Many major industrialists, at some time in their career, have been the subject of ridicule and protest from groups such as the Occupy movement.
Activists protest cuts to US government agencies by Elon Musk outside SpaceX facility in California. (Reuters: David Swanson)
While made to briefly feel uncomfortable, most weathered the storm with their business and wealth intact, as the protesters were ideologically and socially in a separate universe.
This time around, the protests look to be gaining traction among the mainstream.
Musk’s customers generally have been well off but left-leaning.
Tesla was positioned as a revolutionary champion in the corporate march for a clean and green planet with Musk as a visionary leader in the quest for lower carbon emissions.
Not only were Tesla cars high performance, quality vehicles, their owners saw themselves as early adopters of the push towards electrification and a rejection of a fossil fuelled past.
Musk’s emergence as a right-wing warrior has alienated many of his loyal customers, to the point that even investment bankers, like Saxo Bank’s global head of investment strategy Jacob Falkencrone, are wondering how much more damage he will do to the company.
“His increasingly vocal political stances and erratic behaviour have alienated some traditional buyers.
“Investors are asking whether Musk’s personal brand is starting to weigh on Tesla’s business,” Falkencrone said.
Some Australian Tesla owners have printed their own bumper stickers. (Supplied: David Gillard)
Then there is his relationship with Trump.
On the surface, the pair appear to have little in common — Trump doesn’t believe in climate change, has no time for electric vehicles and is completely opposed to American industry manufacturing offshore, and particularly in China.
Musk caters to a world that sees climate change as an existential threat and produces electric vehicles in Texas, Nevada, Shanghai, Berlin and Mexico.
Who is selling out?
Tesla has a strong connection to Australia — or, at least, to an Australian.
The company’s chair is Robyn Denholm, once a senior executive of the similarly named Telstra.
Tesla chair Robyn Denholm has been selling down her holding in the automaker. (Supplied: Tesla)
In the past few months, she has been dumping Tesla shares by the electric truckload.
As of Friday, she has offloaded more than $US117 million worth of Tesla stock, adding to the woes brought on by the onslaught of poor sales and production announcements, and Musk’s self-inflicted damage.
She was already under pressure.
A director for more than decade, she has chaired the company since 2018 and served on the company’s compensation committee which, controversially, granted Musk a $US56 billion pay deal shortly after she ascended to the top.
Last year, a Delaware court judge ruled against the pay deal and questioned the independence of the board.
