Image Credit: Bloomberg

Tae Helton, a car enthusiast living near Tesla’s flagship California factory, bought a Tesla Model 3 for his family and nearly bought a second one last year. However, after just 2,500 miles, Helton says the pride he once felt while driving the car has faded. The 49-year-old moderate plans to pay off his loan early and trade the sedan by the end of the year.

Helton is not alone in his shift in sentiment. Tesla’s sales have taken a significant hit, particularly in Europe, where the company saw a 45% drop in sales in January and experienced its first annual decline in global deliveries in over a decade. A key factor in the decline is the increasing political involvement of CEO Elon Musk, whose actions have begun to clash with Tesla’s values and alienate customers.

In California, a state crucial to Tesla’s early success, sales fell by 12% last year, with Musk’s political commentary reportedly influencing consumer sentiment. Similarly, in Germany, where Tesla registrations dropped by 41% in 2023 and 59% in January, Musk’s vocal support for far-right politics, including denying the impact of carbon emissions, has alienated potential buyers. The UK, Europe’s largest electric vehicle market, is also seeing a decline in Tesla sales, with Musk’s alliances with politicians opposing net-zero targets further eroding the company’s appeal.

Jacob Falkencrone, global head of investment strategy at Saxo, points out that Tesla’s main challenge in 2025 will not be technology but perception. Musk’s controversial political stances have hurt brand loyalty and investor confidence, according to Falkencrone. In fact, a 2023 Bloomberg survey of over 5,000 Tesla owners showed a significant drop in sentiment toward Musk.

The backlash has escalated in 2024, with activists projecting footage of Musk’s actions onto the Tesla factory in Berlin and several showrooms being vandalized in the Netherlands, Colorado, and the US. Protests have also been staged at Tesla stores across the country.

Musk’s poll numbers have also taken a hit, with poor ratings in countries like Germany, Sweden, and the UK. According to Pew Research, a majority of Americans view Musk unfavorably, with more voters expressing concerns over his influence on US politics. Musk, himself, acknowledged in a Fox News interview that his support from the left has waned significantly.

Despite these challenges, Tesla remains hopeful for recovery. The company’s leadership has told investors that they expect the vehicle business to return to growth this year, though specific figures have been avoided. Some of the early-year weakness in sales is attributed to production line changes for the Model Y, Tesla’s most popular vehicle. These updates have resulted in a temporary loss of output. Additionally, Tesla has promised more affordable models to be released in the first half of this year, but few details have been provided.

However, for some consumers like Eric Thurber, Tesla’s decline in appeal is personal. Thurber, who bought a Model 3 in 2021, planned to keep his car for several years but ultimately sold it at a loss due to Musk’s controversial actions. He traded in his Model 3 for a BMW i4, stating he could no longer support the company under Musk’s leadership.

Similarly, Micah Barber, a professor in Austin, Texas, has ruled out buying a Tesla for his family, despite admiring the company’s innovation. Barber believes Musk has become a dangerous figure and has instead decided to look at other electric vehicle options.

Tesla’s competitors have capitalized on its struggles. In California, Honda and Hyundai saw significant gains in the state’s electric vehicle market last year. In Germany, brands like Volkswagen and BMW increased their sales in January, as Tesla’s share of the market continued to decline.

The luxury electric vehicle market has also seen growth from companies like Lucid Group and Polestar. Many Lucid customers are former Tesla owners, and Polestar’s CEO confirmed they’re targeting disgruntled Tesla customers in their sales strategy. BJ Birtwell, CEO of Electrify Expo, noted that the electric vehicle market is now more competitive than ever, with multiple manufacturers offering strong alternatives to Tesla.

For Helton, the decision to switch to a Hyundai Ioniq 5 over a second Tesla was driven by more than just a preference for the car itself. As he put it, he votes with his wallet, and in recent months, he’s chosen to support a brand whose values align more closely with his own. Despite once being eager to buy another Tesla, he ultimately turned away from the company due to Musk’s political actions. The impact of those actions on Tesla’s brand is becoming increasingly clear.

Paraphrasing text from "Bloomberg"all rights reserved by the original author