Additional Coverage:
- America’s largest economy is falling out of love with Tesla—and it’s only going to get worse (newsbreak.com)
Elon Musk, the high-profile entrepreneur behind Tesla, SpaceX, and X Holdings Corp., delivered a presentation at the Milken Institute’s Global Conference held at the Beverly Hilton Hotel on May 6, 2024, in Beverly Hills, California. Musk’s relationship with California appears to be cooling as he continues to criticize the state and has announced plans to relocate his businesses to Texas. This shift seems to be reciprocated by Californians, who are increasingly turning away from his companies.
Tesla’s sales figures in California have seen a significant downturn, with a 24.1% drop in the second quarter, marking the third consecutive quarterly fall. The decline was preceded by a 7.8% decrease in the first quarter of 2024 and a 9.8% drop in the last quarter of the previous year.
Overall, Tesla’s sales in California have decreased by 17% this year in comparison to the previous year, based on data from the California New Car Dealers Association (CNCDA) which tracks new vehicle registrations. In contrast, other car manufacturers like Toyota, Hyundai, and Ford are experiencing rising sales of their battery-electric vehicles (BEVs) in California, with Toyota BEVs climbing by 108.1%, Hyundai by 65.7%, and Ford by 26.4% so far this year.
Brian Maas, president of the CNCDA, attributes Tesla’s sales slump to several factors, including the aging models of the Tesla Model 3 and Model Y, which haven’t been updated significantly in the past five years. Consumers are also being attracted by the competitive pricing, newer models, and a wider variety of options offered by other automakers. This trend is highlighted by the Hyundai Ioniq 5 becoming the third best-selling EV in California, pushing the Tesla Model X out of the top three.
The political landscape may further influence consumer preferences. Musk’s recent $45 million per month contributions to a pro-Trump Super PAC and public endorsements of the former president have sparked concerns, especially in predominantly Democratic California. A study from reputational management firm Caliber suggests that while Republicans may view Musk more favorably, Democrats are more likely to purchase electric vehicles, typically opting for brands that align with their environmental values.
Despite this, Tesla still leads California’s EV market with the Model Y and Model 3 topping the sales charts among BEVs and plug-in hybrids. However, BEV enthusiasm seems to be more localized to California, where the market share is 21.4%, compared to just 7.5% across the United States.
While it’s challenging to directly link Musk’s political stances to Tesla’s purchasing trends without more detailed research, Maas believes that the downswing in Tesla sales could primarily be due to the vehicles’ lack of recent updates rather than the CEO’s political expressions. Nonetheless, the impact of brand perception on consumer behavior cannot be entirely discounted.