Elon Musk political shift seeks new Tesla buyers, analyst says

Tesla CEO Elon Musk's decision to host the presidential announcement of Florida Gov. Ron DeSantis on Twitter was marred by technical glitches and relatively few listeners for the audio-only format. Analysts suggested it was bad for DeSantis, bad for Twitter and bad for Musk.

But it may have been good for Tesla.

Musk's widely covered public embrace of DeSantis, a conservative Republican, is part of a larger strategy to better position Tesla in red states where car buyers have been reluctant to consider the EV brand, one longtime industry analyst said. Blue-state California has by far been Tesla's most important market since its founding.

"No matter how altruistic Elon seems at any moment, he is first and foremost a businessman, and he will do things that will benefit him financially first and foremost," said Karl Brauer, executive analyst at iSeeCars and a former analyst at Cox Automotive and Edmunds.

Musk hosted the Twitter political event with DeSantis on May 24. The sound was not working for the first 20 minutes.

With Tesla's growth waning in the U.S., Brauer said, a shift in the brand's image from liberal California to red-state Texas could open an untapped market. In late 2021, Musk moved Tesla's company headquarters to Austin from Silicon Valley.

Brauer believes Musk's very public political shift is part of a brand realignment to find those new buyers.

"He's convinced all the Tesla fans to buy Teslas, and he's not going to get any more," Brauer said. "There's a huge percentage of people that still don't know about or buy Teslas."

While some loyal Tesla owners will be offended at Musk's rightward shift and abandon the brand, many more potential buyers are likely to show interest now that Musk has their attention.

"I don't know how much of this is genuinely Elon Musk's feeling about the world and how much of it is a calculated risk, but I think at the end of the day, he feels confident that this will not hurt him overall and only help him," Brauer said.

Experian registration data for the first quarter showed Tesla with 56,809 deliveries in California for the period, and just 12,872 in Texas. California has about 39 million people, and Texas has about 31 million. Tesla this year will launch its Texas-made Cybertruck pickup.

Tesla no longer has a press office and did not respond to an email seeking comment.

Musk said in an interview with CNBC last month, following a Tesla shareholder meeting, that he's committed to speaking his mind on controversial issues even if it hurts his business interests.

"I'll say what I want to say, and if the consequence of that is losing money, so be it," Musk said.

That comment came in response to a question about Musk's controversial Twitter posts about Jewish businessman George Soros and about a mass shooting at a mall near Dallas in early May. Musk said the shooter had not been proven to be a white supremacist despite Nazi tattoos.

Asked why Musk would want to engage in a Twitter debate over the motives of a mass shooter, Musk said: "We should not be ascribing things to white supremacy if it's false."

Musk bought Twitter last year, pledging to restore accounts that had been suspended for hateful speech under rules by the platform's previous management.

Musk, with 142 million Twitter followers, has said that he voted for Democrats in the past for president, including Joe Biden, but is now voting Republican. In last year's midterm elections, Musk urged his followers to vote for Republican candidates. Musk said the Democratic Party has moved too far to the left.

While Brauer expects Musk's political shift to draw more potential buyers to the Tesla brand, a recent Axios Harris poll suggests the billionaire's Twitter antics are hurting the automaker's image in the short term.

The poll of Americans, published last month, ranks the top 100 companies based on brand reputation. Axios called Tesla one of the "tarnished titans" along with bankrupt cryptocurrency exchange FTX.

"Tesla saw one of the biggest reputation drops of the past year, from 11th in 2022 to 62nd place this year," Axios said. "Elon Musk's chaotic takeover of Twitter not only pushed the social media company's own ranking down but shook investors' faith in Tesla by making the public more aware of Musk's manic leadership style."

Mario Natarelli, managing partner of the MBLM marketing group, doesn't see Musk's political shift and controversial Twitter posts as an attempt to shift from "blue" liberal customers to "red" conservative shoppers.

"I don't buy the argument that Musk is trying to pivot to red customers," Natarelli said. "To think that he's doing it on purpose seems really shortsighted."

Many brands seen as blue, such as Apple, or red, such as Walmart, are able to attract broad swaths of the American political landscape by focusing on their brand strengths, Natarelli said.

MBLM publishes an annual brand intimacy report that ranked Tesla as the top automaker last year. Natarelli expects Tesla to fall in the 2023 rankings when they come out later this year. Last year, Disney topped MBLM's overall brand intimacy rankings, followed by Tesla and Apple.

Natarelli is also the co-author of the book, Brand Intimacy, a New Marketing Paradigm.

Tesla remains a hugely positive brand story, Natarelli said, with great products, a clear vision for the future and talented executives. But Musk is stepping on that message by wading into political punditry.

"People's identity and the automotive brands they choose to drive are heavily aligned," Natarelli said. "It's a huge statement of who you are, what you like for many people."

Tesla is leaving behind fans who like the product but are now asking themselves, "Why would I contribute to something that's toxic?" Natarelli said.

The timing of Musk's political activism is also complicated for Tesla given increasing competition in the EV market. Tesla's share of U.S. electric vehicle registrations was 60 percent in the first quarter of the year, according to Experian. That's down from 72 percent in first-quarter 2022.

Musk probably won't change his behavior until Tesla's stock price takes a bigger hit, Natarelli said. The stock is down 20 percent over the past 12 months but sharply higher since January.

"I think some of it is folly," Natarelli said of Musk's high-profile Twitter posts. "Being in the news, being debated, being pondered, is part of what excites him, maybe. He's going to keep putting those things out as long as the share price doesn't collapse."