"Unprecedented brand damage"—this is how Ryan Brinkman, a JPMorgan analyst who has been one of Tesla’s most vocal critics, explained the latest downgrade of the company's earnings estimates. The evaluation is harsh, reflecting not only a steeper-than-expected decline in deliveries (-13% year-on-year in the first quarter, with Europe seeing drops up to three times higher, offset slightly by rebounds in Italy and Spain), but also the reputational crisis Tesla is facing due to its CEO's political activism.
Despite being the most valuable company in the world with a market capitalization of $770 billion, Tesla saw its stock drop by more than 10% in the final session of the week. Since President Trump’s tariffs were implemented, the company's performance has been even worse.
On April 2, when the delivery numbers were released, the stock initially dipped after the announcement of new global tariffs at the White House’s Rose Garden, but later closed significantly higher. The reason? Speculation that Musk might step down from his temporary consulting role (set for 130 days) and refocus on Tesla.
However, sales picked up quickly again. Brinkman revised his earnings-per-share forecast to $0.36 for the quarter (down from $0.40) and $2.30 for the full year (compared to Bloomberg analysts’ average estimate of $2.70). This reduction signals a major shift in market sentiment: "We may have underestimated consumer reactions," the analyst wrote, referencing widespread protests and acts of vandalism from California to Germany. These negative responses are aimed at Musk’s political persona, especially after his public alignment with far-right and populist positions.
It seems that Tesla is being more impacted by Musk's controversial, theatrical, and politically charged behavior (such as wearing a cheese-shaped hat at a recent campaign rally in Wisconsin, where he also handed out $1 million checks to attendees) and his sweeping federal employee cuts, than by the actual tariffs on international markets. Tesla manufactures all its vehicles in the U.S. in California and Texas. Yet even the Austin plant will see higher costs due to imported components, with Musk already warning that the company will face a "non-negligible" financial burden.
Not long ago, the partnership between the world’s richest man and the new U.S. president seemed like a competitive advantage. The Republican tycoon’s victory had fueled Tesla’s stock rally, pushing its market cap to $1.5 trillion. Now, however, Musk's political involvement has clearly turned into a setback. The sales decline has been accompanied by protests at Tesla showrooms, acts of vandalism, and an increase in trade-ins in the U.S. In Germany, where Tesla’s only European plant is located, sales plummeted by 62% in the quarter.
Not everyone shares Ryan Brinkman’s outlook. Some analysts believe the stock could rebound, but for that to happen, clear signs are needed, such as new product releases. Time is running out: Musk needs to demonstrate that he is still an innovator first, rather than a political figure. The promises made to investors must be weighed against a more complex reality, one filled with strategic challenges, aggressive competitors like the Chinese company BYD, and a tarnished reputation.
In this context, Musk stepping away from politics could present an opportunity. It would not only help relieve pressure on the stock but could also be a way to rebuild the emotional connection with a growingly skeptical customer base.