Tesla CEO Elon Musk takes the stage at a rally for Republican presidential nominee Donald Trump at Madison Square Garden in New York on Oct. 27.
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The mercurial billionaire’s fawning support of a Republican candidate who promises to roll back environmental progress is a dilemma for a company whose core buyers identify as climate-conscious Democrats.
By Alan Ohnsman, Forbes Staff
E lon Musk took a break from stumping for Republican presidential candidate Donald Trump to join Tesla’s third-quarter results call. The electric car maker’s better-than-expected profit news sent the stock soaring, wiping out a slump that persisted for much of the year. Fielding softball questions from Tesla fans and analysts, the billionaire CEO was notably more impassive than in his spasmodic hopping-filled campaign appearances. Not once during the meandering 72-minute call was Tesla’s volatile leader asked the most obvious question: should he take strident public stands on politics and social issues that are at odds with Tesla core buyers who largely identify as Democrats?
“Tesla’s are the best cars so it still has this advantage. But over time it will become harder for Tesla to get new customers due to his politics,” said long-time investor and former Musk fan Ross Gerber, CEO of Los Angeles-based wealth manager Gerber Kawasaki, who still has a $52 million stake in the company. “Most CEOs intelligently stay out of politics for good reason. Elon doesn’t care about how his right-wing (ironically anti-environmental) support hurts Tesla.”
31% of car shoppers say they’re now less likely to consider purchasing a Tesla as their next vehicle specifically because of Musk.
Multiple consumer surveys back this up. For example, 46% of people in the market for an electric or plug-in hybrid vehicle identify as Democrats, while only 21% and 25% of buyers of those vehicles say they are Republicans, according to data from Strategic Vision, a San Diego-based research firm that surveys tens of thousands of consumers weekly. Auto researcher Edmunds found in its most recent survey data that 31% of car shoppers say they’re now less likely to consider purchasing a Tesla as their next vehicle specifically because of Musk.
“Musk’s behavior has turned off Democrats and at times the abandonment of the Democratic party for Tesla was significant,” Strategic Vision CEO Alexander Edwards told Forbes, adding that it also hasn’t done much to drive EV sales to Republicans. “The net result is a substantial drop in future consideration of a Tesla by any automotive buyer today.”
His political gamble comes at an awkward time for Tesla. Though it managed to boost sales in the third quarter, year to date the brand’s global sales volume is down 2.3%. In the U.S., Tesla’s sales this year through September are down 4.5% even as overall EV sales are up 8.7%, according to Cox Automotive. In California, a highly Democratic state that’s been key to Tesla’s success since its founding and remains the top domestic market, Tesla sales are down about 13% this year.
Embracing Trump
Major public companies and CEOs in the U.S., particularly those that sell products to the general public, typically avoid overt political partisanship to avoid alienating potential customers. Musk’s fanboy embrace of Trump has made Tesla an outlier and it’s clear that Tesla’s board is not inclined, and at least not publicly, to set limits on his often divisive public commentary. Neither Tesla nor Chair Robyn Denholm responded to an email asking if she and other board members have discussed the implications of Musk’s campaign efforts for Trump with him.
Musk’s outspoken positions on social issues, particularly his recent hostility to corporate diversity, equity and inclusion policies, has led the California Public Employees’ Retirement System, or CalPERS, which owns Tesla shares worth about $1.8 billion, to review its investment in the carmaker. That was sparked by a letter to California State Controller Malia Cohen in October from two civil rights organizations asking the country’s largest public pension fund to divest from Tesla owing to its “misaligned” values and Musk’s anti-DEI stances.
Elon Musk leaps on stage with Republican presidential nominee Donald Trump during a campaign rally in Butler, Pennsylvania.
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Trump, who says climate change isn’t a problem and intends to roll back clean energy initiatives begun by the Inflation Reduction Act, wants Musk to serve in an advisory role if he’s elected. Auto industry forecasters aren’t sure what a Trump victory would mean for EV sales, though most anticipate growth in the segment to slow as the Republican has said he’ll end federal rebates for car buyers. Even so, the world’s richest man has in the past year become one of the former president’s biggest financial donors, contributing more than $120 million through his America PAC to support the Republican nominee, as well as congressional and Senate candidates.
He’s also become a highly visible, regular fixture at Trump rallies, declaring himself to be “dark, gothic MAGA,” at a Madison Square Garden event on Oct. 27 that’s been heavily criticized for racist remarks by some speakers, including one who called Puerto Rico a “floating island of garbage.”
Musk’s political shift is a bit of a headscratcher since Tesla owes much of its success to early support from the Obama administration, which provided a low-interest $465 million loan to fund the purchase of its first factory in California, and during the Biden era is the top beneficiary of federal tax credits for electric cars that make them more affordable for consumers. Since the Obama years, Musk’s SpaceX has also received billions of public dollars for rocket and satellite launches on behalf of NASA and the Defense Department. Yet he’s also at the mercy of China, where Tesla’s Shanghai plant has become essential to its profitability, and avoids any public comments critical of the ruling Communist Party.
At the same time, he’s assailed Democratic presidential candidate Kamala Harris as a “communist” in an AI-generated image and with a crude video created by America PAC, and even speculated about why no one has tried to assassinate her in a social media post he claimed was a joke and has since deleted. His close ties to authoritarian leaders, including Russia’s Vladimir Putin, also suggest problems were he to serve in any official capacity in a Trump administration.
“Investors are more focused on margins and what it will take to move metal”
Perhaps even more important than his direct financial support, Musk is using X to promote both Trump and actively amplifies election lies and false information about voting machines and undocumented immigrants voting illegally on behalf of Democrats. America PAC also promotes a fake Democratic campaign program, “Progress 2028,” in a social media ad campaign while the Grok chatbot created by Musk’s xAI spreads false election information on X. Musk is also facing legal problems from his cash giveaways of $1 million to battleground state voters who sign a petition he created. Philadelphia’s district attorney sued him for violating federal election laws, though the matter has been put on hold, pending a federal court review.
Factoring In Politics
Investors were cheered by Tesla’s higher profit margins in the latest quarter and Musk’s promise of much higher sales growth in 2025, potentially up nearly 50% from this year. That sent the stock up 22% on Oct. 24. Baking the impact of Musk’s politics into financial models and earnings estimates, compared with more concrete data inputs, isn’t easy to do, said Jeffrey Osborne, a senior equity research analyst at TD Cowen, who has a hold rating on Tesla shares.
“Investors are more focused on margins and what it will take to move metal,” he told Forbes. For example, Tesla’s reduction of interest rates on car loans for buyers to 0% in the U.S. from 1.99% is a near-term positive. “We’ve tried to factor in all of the puts and takes into our model but it’s hard to rank the order of one vs. the other.”
Musk has long been seen as an unconventional CEO, freely sharing his views on social media on a range of topics that most leaders of public companies steer clear of. This has cost him personally at times, such as when he falsely claimed on Twitter – before he purchased it and turned it into X – that he had secured funding to take Tesla private. The Securities and Exchange Commission hit him with a $20 million fine for that infraction, along with another $20 million paid by Tesla, and forced his removal as chairman of the carmaker’s board.
More recently, he’s promoted anti-transgender views, made comments on X seen as racist, such as those involving Black airline pilots, and endorsed an anti-Semitic post and attacking DEI, drawing rebukes from the National Urban League and the Anti-Defamation League, in addition to the CalPERS review.
“The decline in Tesla’s brand value is a consequence of changes in its strategy and leadership direction”
It’s not just bigger investors that are troubled by Musk’s right turn. He’s also turned off some small retail investors like Miami-based photographer Nancy Ney, who dumped her remaining Tesla shares this year.
“I sold them because of my disgust with Musk’s antisemitic behavior – stating that Jews want to replace Whites in Western countries with non-White minorities,” she said. “His support for conspiracy theories and using X as a platform for his crazy rants is also a reason. Now he is supporting Trump, lying on his behalf and buying votes for him.”
Musk’s controversial views are also part of why Tesla’s rating dropped 9% in the latest annual survey of top global brands by London-based Interbrand, the biggest fall among major companies. “The decline in Tesla’s brand value is a consequence of changes in its strategy and leadership direction,” said Gonzalo Brujo, Interbrand’s Global CEO. “It remains unclear how they will reset the brand for the long term. Given the visibility Elon Musk has in the political sphere, the regulatory hurdles that they must overcome, and the increasing strength of their automotive competition, how Tesla excels as a brand is still an open question.”
People look at a Cybertruck at a Tesla dealership in New York City.
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The Tesla cofounder’s embrace of conservative politics parallels the company’s release of Cybertruck, Musk’s take on the top-selling U.S. vehicle segment, albeit with a polarizing look. Sales of the vehicle, mocked for its appearance and recalled multiple times since it went on sale at the end of 2023, total 28,250 this year, according to Kelley Blue Book. For decades, pickups have been particularly popular with buyers whose politics are more likely to skew Republican and Musk may have had them in mind with Cybertruck, said Strategic Vision’s Edwards.
“I believe he was hoping to capture new Republicans to the EV segment, though this didn’t go as well as desired as there are foundational reasons why Republicans are less likely to consider an EV,” he said.
During Tesla’s Oct. 23 results call Musk said lower-cost models, selling for about $30,000 with government rebates, are on the way starting next year which he believes will help win new customers. Edwards said his surveys suggest many buyers put off by Musk could return to the brand “as a Tesla fits their ideal vehicle and people seem to have a short memory.” But former Tesla shareholder Ney won’t be one of them.
“When I was shopping for an electric car I always said I would not put that man’s name in my driveway,” she said. “I never considered buying a Tesla and ended up getting a Kia EV – which I love.”
