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Spokane, Washington  Est. May 19, 1883

Elon Musk and Tesla: Is the CEO’s controversial behavior responsible for company’s struggles?

The Tesla CEO has spread extremist views, but does it matter to car buyers in an increasingly competitive EV market?    (Dimitrios Kambouris/Getty Images North America/TNS)
By Ethan Baron The Mercury News

The richest man in the world says and does what he wants. And often, it’s contentious and provocative.

Tesla CEO Elon Musk has attacked U.S. election integrity, embraced white-supremacist propaganda and accused President Joe Biden of treason. He even smoked pot on Joe Rogan’s provocative podcast.

Today, the pioneering electric-car company Musk built in Silicon Valley — headquartered in Texas after he moved it from Palo Alto, California — is struggling. This month, Tesla posted its first drop in car deliveries in four years, and Musk told employees that more than 10% of them would be laid off. Two key executives promptly ran for the hills. The company’s stock price has been plunging, even before its Cybertrucks were recalled last week to fix their accelerator pedals.

How much blame does Musk deserve for Tesla’s troubles? Experts say the CEO’s behavior probably turns off some potential customers, but bigger problems are buffeting his company. And with other car makers rapidly broadening electric options, his divisive persona could inflict heavier damage down the line, they say.

“It didn’t make so much of a difference when Tesla was the best game in town for EVs,” said Jo-Ellen Pozner, a management professor at Santa Clara University’s Leavey business school. “But now that there are so many competitors not just in the U.S. but globally, it might become a liability.”

Tesla and Musk did not respond to requests for comment.

Musk’s polarizing presence at the top of Tesla is so unusual for a corporate leader that experts in business management grasp for comparisons: anti-Semitic fellow car-pioneer Henry Ford, perhaps, said AutoPacific chief analyst Ed Kim. Maybe billionaire casino magnate and Republican mega-donor Sheldon Adelson, suggested Jennifer Chatman, a University of California-Berkeley Haas business school management professor.

However, Ford “didn’t make that kind of a central thing about who he is, whereas Elon Musk makes his politics very, very much at the forefront of his public persona,” Kim said. And Adelson, was “not nearly as outspoken as Elon Musk,” and “not as identifiable with a particular company,” Chatman said.

Daniel Ives, senior equity analyst at Wedbush Securities, said “Musk’s antics” have had a significant effect on U.S consumers’ car-buying behavior.

“There is no doubt in our view that Musk has been a negative swing factor for many consumers in their (electric vehicle) purchase decisions,” Ives said.

San Jose business development director Marian Ross is one of those consumers.

“I would never consider a Tesla because it’s Elon Musk,” Ross said, criticizing the CEO’s relatively recent public embrace of right-wing politics while she charged her Kia electric SUV at Valley Fair mall in Santa Clara. “It’s a big no.”

Musk has allowed neo-Nazi content to proliferate on his social media platform X, and criticism of his views on race have also focused on his comments about immigration. The Tesla CEO in February tweeted that Democrats “won’t deport, because every illegal is a highly likely vote at some point.” The claim, central to the groundless White supremacist “great replacement” theory, was starkly refuted by the 500,000 deportations under President Joe Biden during the previous nine months. Musk has accused U.S. media, elite colleges and high schools of being “racist against whites & Asians.”

Musk has also sought to undermine legitimacy of American elections, calling mail-in ballots and voting without government-issued identification “insane” in an echo of former President Donald Trump’s baseless attacks, despite no evidence of significant fraud. He falsely claimed, in a tweet that remains on his platform, that undocumented people “are not prevented from voting in federal elections,” a right-wing conspiracy theory. While Musk has not endorsed Trump for a second presidential term, he met with him in March, and has accused Biden of “treason” over his administration’s handling of migrants.

Meanwhile, Tesla remains embroiled in multiple lawsuits, including by the California and federal governments, alleging rampant racism at the Fremont factory where four car models are made.

However, factors outside Musk’s control weigh more heavily on Tesla than its CEO’s politics, Kim and Ives pointed out. U.S buyers’ transition to electric vehicles has slowed over the past year amid consumer worries about EV technology. And Tesla faces exploding EV competition in the U.S. and China.

While Musk may be tarnishing Tesla’s reputation among some consumers, “reputation is really about product and how reliable and or desirable that product is,” Pozner said.

Auto buyers’ decision-making is generally tightly focused on the vehicle, AutoPacific’s Kim said.

“Most consumers, even conscientious consumers, often don’t actually make their purchasing decision based on the politics of the head of the company,” Kim said.

Some people, even Tesla owners, do not even know Musk heads the company, or pay attention to controversies around him.

“Is he still the CEO?” asked Tesla Model S owner Rafael Alhambra, a 30-year-old pharmacy technician from Sunnyvale. “I don’t ever watch his interviews or anything.”

In public statements, Musk has charted a recent, sharp political turn from left to right. In May 2022 he said he used to vote for Democrats, but “they have become the party of division & hate, so I can no longer support them and will vote Republican.” Musk in January told CNBC he voted for Biden in 2020, but, “I cannot see myself voting for Biden this time.”

Prospective CEOs in elite business schools like Berkeley’s Haas are taught to present a neutral public face to avoid alienating customers, but Musk enjoys provocation, said Chatman, the management professor.

“It’s part of his character to be impulsive and to express his views,” Chatman said. “He believes that even if he doesn’t have all the information he’s so brilliant that whatever he says is going to be important.”

As Tesla’s competition escalates, Musk’s inflammatory rhetoric could prove more costly, business experts said. “At some point shareholders are going to get very unhappy if they believe that Musk is having a detrimental impact on the company’s success,” Chatman said.

San Jose State University engineering technology student Cameron Squire bought his Tesla Model 3 in 2018. His admiration for Musk as a figure akin to the Iron Man superhero has waned only slightly as the CEO has become more “eccentric,” he said.

“I don’t hate him,” Squire said. “But if I wanted to put bumper stickers on this car I’d get the, ‘I bought this before I knew Elon was crazy’ sticker.”