Elon Musk’s X Drama Hurts Tesla Where It Matters Most

At least some EV buyers will prefer a car brand without all the political baggage.

| Updated on: Nov 21 2023, 07:10 IST
Elon Musk says blocking feature on X ‘makes no sense’ to him
Elon Musk
1/7 Elon Musk, the CEO of X (formerly known as Twitter), has tweeted that he wants to eliminate the platform's 'block' feature. Musk made this decision in response to a query from a user, where he sought user opinions on the preference between muting and blocking. (Bloomberg)
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2/7 In a recent post on X (formerly Twitter), Musk clarified that the blocking feature will be discontinued, except for direct messages, while muting will remain an available option. (Bloomberg)
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3/7 On Friday, Musk shared a message, stating, "The 'block' feature is being completely removed, except for its use in direct messages. It simply doesn't make sense," commented the billionaire. (REUTERS)
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4/7 Muting vs. blocking: According to a report by Bloomberg, muting an account will still allow users to avoid seeing posts from that account. However, muted accounts will retain the ability to respond to the user's posts, share them with their own followers, add commentary, and send direct messages. (AFP)
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5/7 User concerns: Blocking, which has long served as a fundamental security measure on X, has raised concerns among users about potential increases in online harassment following its removal. (Pexels)
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6/7 One user reacted to Musk's tweet and replied, "Don’t go there. No one is entitled to other people’s posts. People should be able to block whoever they want". (Pexels)
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7/7 A series of transformations: Some of the significant alterations implemented under Musk's leadership include substantial workforce reductions, replacing the traditional verification program with the $8 per month Twitter Blue subscription, rebranding the company from Twitter to X, and introducing new features such as live streaming. (AP)
Elon Musk
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Elon Musk's latest outrage, endorsing an antisemitic comment on X, has drawn a backlash, including companies pulling ads from the social media platform (Bloomberg)

During a 1990 Senate race in his home state of North Carolina, Michael Jordan was asked why he didn't endorse the African-American Democratic candidate. He was still explaining his response — “Republicans buy sneakers too” — to reporters 30 years later, saying he wasn't an activist in the mold of Muhammad Ali: “I thought of myself as a basketball player.”

Elon Musk may think of himself as an entrepreneur, and a celebrity one at that, but he wears many hats with enthusiasm, including as an activist in the cause of, as he sees it, free speech. His latest outrage, endorsing an antisemitic comment on X, has drawn a backlash, including companies pulling ads from the social media platform. But there may also be repercussions for the main source of his fame and wealth: Tesla Inc.

Tesla has, of course, glided through many of Musk's prior controversies, including those with direct legal implications (“funding secured.”) What is different today is that the market for electric vehicle has become sharply more competitive, as Tesla's own sinking margins and missed sales estimates show, with price cuts indicating buyers are thinking twice about EVs. Musk's company is also gambling on a long-delayed new model, the Cybertruck, whose price and specs remain a mystery 10 days out from launch.Observing a spate of headlines about Americans falling out of love with electric vehicles, Alexander Edwards, chief executive of Strategic Vision, a consumer behavior consultancy, says: “There never has been a love affair with the EV.” He's right about that: Even as EV sales in the US increased by about 50% in the third quarter, they accounted for only 7.9% of new vehicle sales overall.

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For all the progress to date, buying an EV in the US remains unusual and, as Edwards points out, requires the customer to make compromises, whether it be choosing from a relatively limited range of models — and paying a premium to do so — installing a charger in their garage or just getting their head around public charging rather than gassing up.

As it is, EVs, along with clean technologies in general, have become politicized as part of the broader US conflation of climate science with culture wars. EV buying displays a strong correlation with Democratic political support at both the state and county level, according to a new paper out of the Energy Institute at Haas, UC Berkeley. There's a strong correlation even when controlling for factors like income, population density and gasoline prices or excluding the EV hotspots of the West Coast. Republicans buy EVs too, yes, but they undoubtedly buy more sneakers.

Does being a resident of a blue state or county mean Musk's endorsement of antisemitism is a deal-breaker for that new Model Y? That is very difficult, if not impossible, to answer. The point is, leaving aside the moral dimension, this is not a time to be needlessly alienating potential buyers among your core customer base. One other point from third-quarter EV sales figures is that Tesla's market share fell to 50%, the lowest on record, according to Cox Automotive; and that is despite hefty price cuts throughout the year.

Strategic Vision noticed a drop in enthusiasm for Tesla last December, which it attributed to negative associations with Musk's acquisition of Twitter Inc. and subsequent changes to the platform. In surveying 38,000 vehicle buyers, Strategic Vision found Tesla lost ground across every facet of brand value in 2022, providing an opening for competitors. Were the legacy automakers more nimble with their electrification plans, Tesla's market share may have slipped even further.

Musk is trying to contain the latest backlash, denying accusations of antisemitism via a tweet this weekend. He has sometimes reversed course quickly in the past when faced with resistance to some unexpected move at Tesla, most notably when he announced in 2019 that the company would close virtually all its retail sites and his attempt to foist an impractical steering “yoke” on new models earlier this year. Those aren't comparable controversies, of course; the point is that Musk's impetuousness, a strength in some respects, can also expose his companies to real risk, as he himself sometimes seems to recognize. 

The addition of X to Musk's stable presents a structural risk for Tesla. There is a financial link, given Musk's personal exposure to the loss of value in X; his heavy selling of Tesla stock in 2022 accelerated as it became clear he would have to make good on his overpriced takeover offer. The wild card, though, is the brand exposure. To a large degree, Musk is X, where, for either personal or financial reasons — maybe both — he appears to regard controversy as currency. And, to an extent not seen elsewhere in the auto business, Musk is also Tesla. In a more competitive EV market, at least some customers might prefer the car brand that is just a car brand. 

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First Published Date: 21 Nov, 07:10 IST