Tesla investors breathed a sigh of relief after CEO Elon Musk said he would refocus his attention on the electric automaker, but that promise did not entirely dispel worries that his right-wing shift had irrevocably damaged the company’s brand.
The automaker’s shares rose about 5% on Wednesday after Musk said he would cut back his work for U.S. President Donald Trump to a day or two per week from sometime next month after Tesla posted a 71% slump in net income and a sharp drop in automotive revenue.
The billionaire’s work as an adviser to Trump and his embrace of right-wing politics in Europe have drawn widespread opposition, including protests and vandalism at Tesla showrooms.
“His time is very valuable, and I think Tesla needs his attention,” said Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management and a prominent investor.
“But it doesn’t change that people don’t want the Tesla brand. I don’t know how you fix that.”
Shares of the world’s most valuable automaker have lost about half its value since hitting a record high in December, reducing its market capitalization by more than $500 billion, largely on concerns that brand damage could hurt sales for a second straight year.
It is set to add more than $50 billion to its $766 billion market valuation, if gains hold.
While some investors welcomed Musk committing more time to Tesla, experts warned the brand faces a long road to recovery, especially as political controversy continues to weigh on its image.
“Musk could do a reversal on his political career and dedicate 100% of his time to Tesla, but the rot has set in,” said Sue Benson, CEO and founder of The Behaviours Agency, a marketing firm.
“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-in fact it could make things worse as it’s far too late to separate the man from the machine.”
Musk’s support of Trump and affiliation to right-wing causes have alienated a segment of consumers who once aligned with Tesla’s climate-focused mission.
Some analysts have suggested that if the adoption of EVs in more conservative states accelerates, it could offset falling sales in California and other markets.
Brand perception issues have become more pressing for Tesla, which is entering a phase where consumer appeal and affordability are essential for its next stage of growth.
The company reaffirmed plans to launch an affordable model in early 2025, but warned the production ramp could be slower than expected.
Tesla said it will a review of its full-year delivery forecast amid shifting global trade policies in the second quarter earnings update, which is expected in July.
While Tesla is less likely to be affected by global tariffs than legacy automakers, it still expects an outsized impact on the fast-growing energy storage business that uses battery cells from China.
Musk said he has advocated for lower tariffs but the final decision lies with Trump. “I expect this year there will probably be some unexpected bumps this year,” he said.
“Negative impact of vandalism and unwarranted hostility toward our brand and our people had an impact in certain markets,” Tesla finance chief Vaibhav Taneja said.
Tesla also said, “changing political sentiment, could have a meaningful impact on demand for our products in the near-term.”
“Until the brand distances itself from the political baggage it has acquired, Musk’s specific percentage of renewed focus on Tesla may be irrelevant,” said Gabor Schreier, Chief Creative Officer, Saffron Brand Consultants.
