Tesla’s quarterly earnings show that when a company achieves meteoric success, the assumption is that it will continue to do so. However, recent events show just the opposite: neither charismatic leadership or reputation is enough when management and public positioning are plagued by stupid decisions and strategic mistakes.
The warning signs are clear for all to see. Tesla has not only seen a sharp drop in sales, the worst in two years, its image has been seriously undermined by the activities of its CEO, Elon Musk. Overnight, Musk has managed to alienate consumers concerned about sustainability, technology and the environment, while ingratiating himself with a very different demographic: Trump voters. The result? The latter aren’t interested in buying an EV, while the former will never ever forgive him.
The numbers speak for themselves: Tesla has suffered sales slumps in key markets, including China, one of its pillars of growth. In addition, in Europe, the news of incidents such as the fire that destroyed 17 vehicles at a Rome dealership, emphasize the need for Musk to focus on the brand.
The persistent rumors mill about a possible “role change”, or even his departure, might help, but in practice it seems to be too late. Musk has achieved something that seemed almost impossible:he has turned the people most likely to buy his cars into his worst enemies.
Even if Musk does step aside, the damage has been done. Musk is basically toxic to traditional Tesla buyers, who are now increasingly attracted to the vehicles being produced by the competition, which are cheaper and use more modern technology.
There was a time, not that long ago, when Tesla symbolized the future: high performance EVs built on a culture of shared innovation. But in a matter of months, the activities of its CEO have been generating negative headlines almost daily. It would be a very serious mistake to minimise the reputational cost of all this and think that the situation could be reversed at some point. There is no turning back.
Tesla’s story reminds us that a corporate reputation can take years to build, but it only takes a handful of bad decisions and a sufficiently narcissistic or idiotic leader to ruin it. Regardless of whether Musk steps down or not, he will forever be associated with the brand: few people believe the company can regain its former position. In the end, what is clear is that taking sides with market segments that did not believe in your product at the cost of alienating those who supported you is a high-risk move never pays off. This is one of those cases where the wounds are never going to heal. Musk has managed to sink what was once a mythically successful company: a textbook definition of stupidity.
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This post was previously published on Enrique Dans’ blog.
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