Washington DC, April 15, 2025 --  

The self-destruction of America's leading electric car brand is bad news for the country's manufacturing renaissance.

The stunning rise in Tesla Motors has long defied expectations. When it began manufacturing its Model S sedan in California in 2012, it did so as the first new American car manufacturer to have gone public in over half a century. Despite competition from America's big three automakers and their deep manufacturing experience, Tesla would go on to capture the majority of America's electric vehicle market for over a decade and become the leading electric vehicle manufacturer around the world.

Tesla's heyday is now in the past. Last year, as China's BYD sold more than double the number of vehicles as Tesla, with Tesla actually seeing a year-on-year sales decline.¹ In the US market, the first quarter of 2025 saw Tesla lose its sales majority of electric vehicles in favor of a number of traditional brands from Ford, GM, BMW, Hyundai and others.² Overall Tesla sales around the world dropped 13 percent from the same quarter in 2024.³

Tesla's failure to keep up with its rivals has been years in the making -- its sales have been largely flat while its competitors have been growing. But then in a stunningly self-destructive act, Tesla's CEO Elon Musk dove head first into right-wing politics, alienating many of his customers. He endorsed Donald Trump last July, and after Trump's election joined his administration to lead a purge of the federal bureaucracy as the unofficial leader of the Department of Government Efficiency. If this were not enough, he then endorsed Germany's far-right AfD party in this year's elections. These acts make enemies out of much of Tesla's customer base, which is disproportionately made up of affluent progressives and environmentalists. This resulted in the most stunning destruction of an automotive brand since Volkswagen was caught cheating on emissions tests a decade ago.

Anger against Tesla for Musk's behavior goes far beyond a sales slump. Reports of vandalism against parked Teslas have become common and in February there was an arson attack on a Tesla plant in Germany.⁴ The key problem is that Musk's cult status has been so closely intertwined with the company, that a severe hit to his popularity, whether you agree with it or not, puts a major stink on the brand. And brand identity has always been a big part of consumer decisions when purchasing cars.

America's Musk-haters should be careful before they cheer on the decline of Tesla. Tesla has been the primary driver of America's shift toward electric vehicle manufacturing -- in a sense America's national champion. Tesla's competitors in the American electric vehicle market largely build their cars overseas, including Ford, which builds its electric Mustang in Mexico. Americans rooting against Tesla are effectively rooting against American manufacturing in a key strategic industry.

Unfortunately, it's hard to see how Tesla can repair the damage in the near-term. The obvious answer would be for the board to replace its CEO and distance Tesla from Musk's ugly antics, which have devolved from run-of-the-mill eccentric billionaire crazy stuff to hard core right-wing activism than many will never forgive. Yet it seems unlikely that the Tesla board will ditch him any time soon, because their money still rides on Musk's cult of personality.

Don't believe the hype that Tesla's stock price has collapsed. While it has declined from the huge gains made after Trump's election, its $256 share price today remains higher than last July's $248 share price on the eve of Musk's endorsement of Trump.⁵ Consider that Tesla's current price to earnings ratio stands at about 125 -- way higher than the S&P 500 index average of 27. So why does Tesla's stock trade at four to five times more relative to earnings compared to the rest of the market? It's because shareholders a cult-like belief in the vision Musk himself (deserved or not) will drive future Tesla profits four to five times what they are today. If the board ditches Musk, that crazy but true justification for the high stock price will go away.

Don't expect board members to move against their CEO until the stock declines by another 75 percent or more. If that decline happens quickly, then there may be some hope -- especially if a wildcard suitor like Apple acts to rescue the brand.

Barring such a rescue, Tesla's decline still won't mean the end of electric cars in America. People will still buy them as imports provided tariffs don't make imports prohibitively expensive. And there will still be some domestic electric vehicle manufacturing by other companies, even if won't be like in Tesla's heyday. But for anybody who cares about the future of manufacturing in America, it is a real shame to see Tesla, a one time world leader, effectively self-destruct. It is precisely in new industries where companies and nations have the best opportunity for rapid growth in manufacturing. America's opportunity there now looks lost. For a CEO wearing a hat promising to "Make America Great Again," he sure seems hell-bent on doing the exact opposite.

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Notes:

1. Economic Times, China’s BYD Overtakes Tesla as the World’s Top EV Seller, March 25, 2025

2. Teslarati, These Were the Best-Selling EV Brands in the U.S. in Q1, April 13, 2025

3. Ibid.

4. Deutsche Welle, Police probe arson attack linked to Tesla plant in Berlin, February 27, 2025

5. Google Finance, Tesla and S&P500 price data, as posted April 15, 2025