Tesla shares surged nearly eight per cent yesterday after CEO Elon Musk pledged to refocus his attention on the electric automaker, despite backlash against the billionaire for his political actions in recent months.
The billionaire promised to reduce his work for US President Donald Trump and the Department of Government Efficiency (DOGE) to just one or two days per week from next month.
Despite the positive market reaction, concerns persist that Musk's embrace of right-wing politics has caused lasting damage to Tesla's brand.
The stock recovery would add more than $50billion (£37.2billion) to Tesla's $766billion (£570.6billion) market valuation if gains hold.
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Activists have been calling for people to boycott Elon Musk's electric car brand
REUTERS
Investors welcomed Musk's commitment to spend more time at Tesla, but experts warn the company faces a difficult path to restore its tarnished image.
The company reported a staggering 71 per cent slump in net income alongside a sharp drop in automotive revenue. Tesla's market capitalisation has plummeted by more than $500billion (£372.4billion) since hitting a record high in December, Reuters reported.
The dramatic decline reflects growing investor concerns that brand damage could hurt sales for a second consecutive year. Further calls for a Tesla boycott from campaigners could gain traction and harm the brand further.
Despite these challenges, Tesla shares continue to trade at approximately 89 times profit expectations, which remains significantly higher than traditional automakers like Ford and General Motors, as well as other tech giants in the "Magnificent Seven".
Protests against Tesla have taken place outside dealerships and showrooms around the world
REUTERAThe company's financial struggles have intensified scrutiny of Musk's divided attention between Tesla and his political activities.
Musk's support for Trump and affiliation with right-wing causes have alienated consumers who once aligned with Tesla's climate-focused mission. The political controversy has led to widespread opposition, including protests and vandalism at Tesla showrooms.
"Negative impact of vandalism and unwarranted hostility toward our brand and our people had an impact in certain markets," Tesla finance chief Vaibhav Taneja acknowledged.
The company also warned that "changing political sentiment could have a meaningful impact on demand for our products in the near-term".
Elon Musk spoke to AfD supporters earlier this year at an event in Halle, Germany
REUTERSSome analysts suggest that accelerating EV adoption in conservative states might offset falling sales in California and other traditional Tesla strongholds.
Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management and a prominent investor, said: "His time is very valuable, and I think Tesla needs his attention. But it doesn't change that people don't want the Tesla brand. I don't know how you fix that."
Marketing expert Sue Benson offered an even bleaker assessment of Tesla's prospects. She said: "Musk could do a reversal on his political career and dedicate 100 per cent of his time to Tesla, but the rot has set in. No product can fix this, and no amount of time spent in Tesla's offices will undo the new perception many people have of Musk."
Tesla reaffirmed plans to launch an affordable model in early 2025, although it warned production ramp could be slower than anticipated.
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Elon Musk's work with DOGE has led to widespread protests and vandalism
REUTERS
The company will review its full-year delivery forecast amid shifting global trade policies in its July earnings update.
Musk said he has advocated for lower tariffs, but the final decision rests with Trump, adding that he predicted that there would be "some unexpected bumps" this year.
Brand perception issues have become increasingly critical as Tesla enters a phase where consumer appeal and affordability are essential for growth, with experts remaining sceptical about Tesla's ability to separate itself from Musk's political activities.
Gabor Schreier, Chief Creative Officer at Saffron Brand Consultants, said: "Until the brand distances itself from the political baggage it has acquired, Musk's specific percentage of renewed focus on Tesla may be irrelevant."
