THE ECONOMIST: Elon Musk’s antics are not the only problem for Tesla

Friends help each other out. Tesla’s boss, Elon Musk, may well have been grateful when Donald Trump said he would buy one of its electric vehicles (EVs) on March 11.

Yet that was the least the president could do for his bureaucracy-basher-in-chief. The day before Mr Trump had helped bring on a fall of over 15 per cent in Tesla’s share price, amid a wider sell-off sparked by his trade policies and his warning that America’s economy faced a “period of transition”.

The subsequent Trumpian endorsement will not be enough to apply the brakes to Tesla’s declining sales and slumping share price.

Mr Musk’s backing for Mr Trump’s second presidential run once looked like a clever business move.

His reward was to run the Department of Government Efficiency (DOGE), boosting what Barclays, a bank, calls the “Elon premium”. Investors clearly thought that his political sway would do Tesla good. Its market value hit a record $US1.5 trillion ($2.4trn) in December.

Since then his closeness to Mr Trump and support for far-right causes have prompted a backlash.

Protests against Mr Musk’s role at the heart of the administration and doge’s mass firings of civil servants have gathered steam in America.

Picketing of Tesla showrooms has turned ugly, with windows smashed and vehicles vandalised; a Tesla charging station was attacked by arsonists.

Outside America, Mr Musk’s actions have also provoked protests against the carmaker. So closely are the man and brand intertwined that embarrassed owners are resorting to anti-Musk bumper-stickers to distance themselves from him.

But Mr Musk’s behaviour only partially explains Tesla’s troubles. Sales were falling before he took a chainsaw to America’s public sector.

Last year Tesla dropped a long-standing aim to be making 20 million cars annually by 2030 and reported its first decline in annual sales for many years — a fall of 1 per cent, to 1.79m cars.

Sales have continued to fall in recent months compared with a year ago, at a time when the EV market overall is still growing. Barclays, a bank, estimates that first-quarter sales in Europe could be down by around 30 per cent.

In Germany, where Mr Musk caused an uproar by supporting a far-right party in recent elections, sales fell by 76 per cent in February, year on year.

Yet Barclays reckons that first-quarter sales in America, where antipathy to Mr Musk seems highest, will be flat.

Sales in China also fell by nearly 14 per cent in January and February, but a political backlash is an unlikely explanation; Mr Musk is generally regarded as pro-China.

In Britain, where his political meddling should be a factor, Tesla sales actually increased by almost 21 per cent in February.

This suggests that the reaction of consumers to Mr Musk’s antics are only one reason for falling sales. An updated Model Y, Tesla’s best-selling vehicle, has just gone on sale. In preparation Tesla ran down inventory of the old model, crimping supply.

Customers have doubtless held off purchases until the new car is available.

The bigger problem, though, is that Tesla has become what Philippe Houchois of Jefferies, an investment bank, calls a “reluctant carmaker”. It relies for the bulk of its sales on two models, the 3 and the Y, whereas global giants such as Toyota have many more to satisfy all parts of the market.

In October Mr Musk decided against launching a cheaper “Model 2”, instead switching focus to robotaxis and humanoid robots. Meanwhile the competition from established carmakers and Chinese newcomers is heating up.

Tesla’s valuation has long lost any connection with fundamentals, and is more a bet on Mr Musk’s ability to revolutionise any business he turns his hand to. He now claims that robotaxis and robots will make Tesla the “most valuable company in the world by far”.

That hints at another explanation for Tesla’s plunging share price, as Mr Musk spreads himself ever thinner. In an interview with Fox News on March 10 he noted the “great difficulty” he faced running Tesla and his other companies while working for the Government.

As he inspected his potential new purchase outside the White House, Mr Trump chastised protesters for “harming a great American company”. Yet much of the blame for that harm lies with his buddy, Mr Musk.