The EV maker is being affected by its CEO’s misadventures on social media.
Elon Musk is putting an old saying about notoriety to an extreme test.
There’s no such thing as bad publicity, the saying goes.
But Musk’s increasingly strident posts on Twitter, are starting to have an impact on Tesla, where he also serves as CEO.
Tesla’s favorability ranking declined by 53.5% during the past year, impacted by Musk’s tweets after he acquired Twitter and took the social media company private.
Only 13.4% of U.S. adults view the electric vehicle manufacturer favorably as of January 2023, according to data from Morning Consult, a brand intelligence firm. A year ago 28.4% of U.S. adults had a positive view of the company, whose stock fell by 61.2% during the last year.
The decline was led by Democrats who tend to be fans of EVs, including purchasing Teslas. Only 3% of these adults had a favorable view of Tesla, a rapid decline of 10.3% from December 2022.
Many investors were concerned that Musk focused solely on Twitter after his $44 billion acquisition in October. The billionaire’s tweets also turned more conservative. His decision to allow previously banned accounts back onto the microblogging site to tweet racist or anti-Semitic comments also pushed both users and advertisers away.
Tesla bull Gary Black said Tesla’s brand has not “taken a hit” despite those concerns.
When Teslas’s favorability dropped, Musk did not continue tweeting conservative stances, he said.
“Elon is a smart guy and learned to stop tweeting more conservative views,” Black said. “You don’t want your brand to be impacted by your more right leaning views especially if your customer franchise is over indexed to climate-friendly Democrats. It annoys them.”
The decline that was recorded by Morning Consult is only temporary, he said in a tweet.
“The drop in $TSLA favorability scores should not be surprising, given Elon’s acquisition of Twitter in October, and Elon’s tendency to express right-leaning political views, which has likely angered many in the Democratic base that have traditionally over-indexed Teslas,” Black tweeted on Jan. 18.
The drop in favorability should reverse itself, he said.
“I expect TSLA favorability rankings to stabilize or improve from here. In 2023 @elonmusk has significantly scaled back tweets about his political views on TWTR,” Black tweeted.
Tesla missed its 2022 delivery target and Musk sharply cut the prices of its two flagship models: the entry-level Model 3 sedan and the Model Y SUV, which constitute 95% of its 2022 deliveries.
The drop in prices range from 7% to 20% and there are two models eligible to benefit from the new U.S. federal tax credit of $7,500.
Tesla Price Cuts Boosting Stock Price
The massive price cuts averaging $10,000 a vehicle “help,” he said. “This is boosting $TSLA shares, despite a 16% cut in FY’23 ests over the past mo.”
Shares of Tesla have risen by 5.39% during the past five days after a slump of 14.07% during the past month.
Black, managing partner at Future Fund, is confident that the massive price cuts of up to 20% for some models will not impact the status and long-term valuation of the electric vehicle manufacturer.
He said the cuts Musk made “seem to be positively impacting sales ” as the billionaire tries to increase growth as sales figures fell.
The number of weekly registrations for Tesla vehicles in China rose to 12,654 for the week of Jan. 9 to Jan. 15 from the prior week’s 2,110, Black said.
Registrations are a metric that analysts use to track the number of cars that are delivered and registered from buyers.
“Tesla is still the cool car and clearly the number one car with 60% market share of EVs in the U.S. and under 20% globally,” he said. “It is still the most desired car to electric vehicle buyers.”
The price cuts were necessary even though they will impact profit margins in the short-term, said Black.
Tesla consists of 9.2% of Black’s Future Fund Active ETF FFND as of Jan, 17. The EV maker had a terrible fourth quarter because of Twitter “noise” and the impact of lower production output from its factory in China, he said.
Future Fund ETF, which was launched in August 2021, bought more shares of Tesla last week at $105 a share, but Black did not disclose the number of shares.
“They had to do something.to get volume growth,” he said. “It’s hard to say whether they were too much. They needed to do it.”
New Lower Tesla Prices Put in Place
The retail prices now start at $43,990 for the Model 3 rear-wheel drive and $53,990 for the Model 3 Performance, according to the company’s website.
All Model Y configurations will now be eligible for the tax credit, which wasn’t the case before the price cut.
To qualify for the federal tax credit, cars, sedans and wagons must have a retail price of no more than $55,000. SUVs, on the other hand, with a retail price of up to $80,000 are entitled to the credit.
“There will be a significant impact to TSLA’s near-term gross margin, and the math depends on how long these new prices levels last,” warned Evercore ISI analyst Chris McNally in a research note.
By lowering its prices Tesla, however, solves a problem pointed out by Toni Sacconaghi, analyst at Bernstein, in a Jan. 2 note.
“We believe Tesla will need to either reduce its growth targets (and run its factories below capacity) or sustain and potentially increase recent price cuts globally, pressuring margins,” he said. “We see demand problems remaining until Tesla is able to introduce a lower-priced offering in volume, which may only be in 2025.”
During a Twitter Space in December, Musk said the logic behind the new pricing strategy: margins compressing during a recession allows volume to still grow. Tesla can make up the shortfall by selling software and services like Full Self-Driving, its advanced driver-assistance system.
Earlier in 2022 some buyers waited nine months for a Tesla, but those “days are long gone,” said Morgan Stanley analyst Adam Jonas on Jan. 13. He has a price target of $250.