Al Root

Tesla is suffering through an anti-anti-woke brand backlash with the company's traditional politically left-leaning owners turned off by CEO Elon Musk's right-leaning political activities.

Investors are scrambling to understand the damage -- and if it's permanent. Lesson from Bud Light's recent problems can be informative, even if investors won't like the conclusion from that comparison.

"My wife is insisting that we sell the Tesla...It's the best car I've ever owned," says Arjun Divecha, director and head of emerging-markets equity at GMO. Having the car is a bad look in a left-leaning town these days. "If you live in Berkeley, Calif., you cannot afford to have a Tesla anymore. I'm not kidding you."

"The Tesla brand is broken," adds Santa Monica, Calif.-based Gerber Kawasaki CEO Ross Gerber.

Those are two anecdotal examples of what Tesla is facing. The anecdotes are starting to add up to real-world impact, though. Tesla sales fell in all key regions in January. February data haven't been much better, leading Wall Street analysts to cut their first-quarter delivery estimates.

A Tesla researcher who goes by the handle @TroyTeslike on X recently lowered his first-quarter delivery estimate to 360,000 vehicles. (Several Wall Street analysts use Troy's estimates to help them forecast.)

A few weeks ago, Teslike saw 400,000 vehicles delivered in the first quarter while Wall Street projected 460,000. Wall Street's current estimate is still well above Teslike's at about 420,000 cars. Tesla delivered about 387,000 vehicles in the first quarter of 2024, so analysts still project growth that might not materialize.

It's safe to say some brand damage has been done. Future Fund Active exchange-traded fund co-founder Gary Black, however, doesn't believe any brand damage is permanent. Neither does Wedbush analyst Dan Ives, who recommends that investors remain patient.

Even if they are correct, it could take a while for sales to bounce back. Just look at Anheuser-Busch InBev's Bud Light brand.

Bud Light ran into a sales problem after a controversial social media post with transgender influencer Dylan Muvaney in April 2023.

Three months after the post, sales were down almost 30%, according to Harvard researchers, with the drop steeper in Republican counties. Declines persisted, and Bud Light sales remained down about 30% one year later with similar declines in Democratic and Republican counties.

To be sure, there are differences between Bud Light and Tesla. For starters, some declines relate to beer distributors choosing to hold less Bud as beer drinkers moved on to Coors, Miller, and Modelo. Tesla dealerships won't do the same. What's more, substituting Bud Light for another light beer might be easier than substituting another EV for a Tesla. Even Gerber says Tesla still makes the best EVs.

Not every backlash results in long-lasting impacts, either. Harvard researchers found "small, short-lived effects" for brands including Nike, Goya, and Pepsi that have faced boycotts in recent years.

Tesla has the additional advantage of being more than a car company. Wall Street has become enamored with the possibility of AI-computing unlocking significant value. Tesla uses AI to train cars to drive and create humanoid labor-saving robots. Tesla plans to start a robotaxi service in 2025, and ramp robot sales in 2026.

Still, the prospect of a year-long sales slump for the EV maker is a scary proposition for Tesla investors. Tesla sold about 1.8 million cars in 2024, flat with 2023. Wall Street expects some 2 million cars sold in 2025, partly boosted by a new, lower-priced model due out midyear.

A new Tesla model selling well would go a long way toward assuaging investor fears, as would Musk's taking a step back from the D.C. spotlight.

The latter might be too much to hope for. Musk directs President Donald Trump's newly created Department of Government Efficiency agency. Monday, Musk told Fox Business' Larry Kudlow his DOGE work won't be done for a year.

Tesla stock was up 1.9% in midday trading Tuesday after a brutal 15.4% decline on Monday. The S&P 500 and Dow Jones Industrial Average were down 0.8% and 1.2%, respectively.

Write to Al Root at allen.root@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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March 11, 2025 11:52 ET (15:52 GMT)

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