Elon Musk is facing one of his toughest tests yet: restoring confidence in Tesla’s brand. The electric carmaker has seen its profits plunge by 71 percent in the first quarter of 2025, driven largely by a backlash against Musk’s political affiliations and controversial role in President Donald Trump’s administration.
Sales of Tesla vehicles across Europe have dropped sharply, with a 45 percent decline in the EU and a staggering 62 percent fall in Germany alone, according to the European Automobile Manufacturers’ Association (ACEA). Showrooms in Europe and the US have become targets for vandalism and boycott campaigns following Musk’s support for public sector cuts and far-right figures overseas. In Milan, protesters hung Musk in effigy, while in Berlin and London, demonstrators labelled Tesla vehicles as “Swasticars.”
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Despite these setbacks, Musk appears intent on shifting focus back to Tesla. During Tuesday’s earnings call, he announced plans to reduce his time working for the “Department of Government Efficiency” – a post he holds in Trump’s administration – to just one or two days per week starting in May. Tesla’s shares rose nearly five percent following the announcement.
Musk rejected claims that political controversies were damaging the brand, instead blaming recent sales drops on production halts caused by upgrades to the Model Y. Analysts, however, are not convinced. JP Morgan described the situation as one of “unprecedented brand damage,” while Wedbush’s Dan Ives, a longstanding supporter of Tesla, called it a “full-blown crisis.”
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Compounding Tesla’s woes is the rise of aggressive competition, particularly from Chinese automaker BYD, which is developing ultra-fast charging batteries. European manufacturers are also rolling out new models with advanced technology, further eating into Tesla’s market share. In the US, Tesla’s dominance has slipped, with its EV market share falling below 50 percent.
Meanwhile, Tesla continues to pin its hopes on autonomous driving. Musk reaffirmed that its Robotaxi service would launch in Austin by June, despite Google’s Waymo already offering millions of driverless trips in several American cities. Musk insists that software updates will soon allow current Teslas to operate autonomously, although such promises have been made – and missed – before.
Tesla’s valuation remains lofty, trading at over 100 times its projected earnings, making the company highly vulnerable to further setbacks.
