top of page
Search
  • Writer's pictureDavid Manion

Are Musk’s Twitter Antics Hurting Tesla Sales? Here’s a Clue


Tesla stock tumbled last week after the company released its earnings for the first quarter. Many observers have been worried that Elon Musk’s Twitter antics have hurt the Tesla brand and its sales in California might offer a clue.


According to Reuters’ calculation, every sixth car that Tesla sold last year was delivered in California which highlights the state’s importance for the company.





However, the company’s market share in the state has fallen and per Reuters’ calculation, it accounted for 59.6% of the BEV (battery electric vehicle) market share in the state in Q1 – down from 72.7% last year.


To be sure, as other automakers ramp up their EV production, Tesla’s overall US market share is also dropping and it fell from 72% in 2021 to 65% in 2022.


However, its sales in absolute terms are growing as the overall EV market is expanding in the country.


During Tesla’s Q1 2023 earnings call, its CFO Zach Kirkhorn said that the company looks at total market share instead of EV market share.



Its US market share is now around 4% which puts it ahead of Volkswagen. Tesla’s Model Y was the best-selling model in the US in the first quarter after excluding pickups.


Tesla Loses Market Share in California

Incidentally, while Tesla lost market share in California in the first quarter, its overall BEV market share in the US increased sequentially.


California is among the most liberal-leaning states in the country – a constituency that hasn’t been too pleased with some of Musk’s antics over the last six months.


Since he acquired Twitter, Musk has warmed up even more to conservatives, restoring many suspended accounts including that of Donald Trump.


His handling of Twitter including the chaos over blue tick verifications has angered many liberals – many of whom have refused to pay for the service.


To be sure, even Cathie Wood – arguably the most vocal TSLA bull – believes that many people might not buy a Tesla car now after Musk’s Twitter antics.


She nonetheless believes that with a compelling product, the company can attract many more buyers.


Wood last week upped her target price on TSLA and sees the stock rising to $2,000 by 2026 – an over 1,100% upside from current levels.


TSLA is Prioritizing Volumes Over Profit Margins

During the Q1 earnings call, Musk said that Tesla is prioritizing volume growth over margins. The company has cut vehicle prices multiple times this year – including twice in April.


These price cuts took a toll on Tesla’s profits with operating margins falling 11.4% in Q1 2023, down from 19.2% in the corresponding quarter last year.


However, the price cuts have also helped the company buoy sales, and deliveries rose to a new record high in the first quarter – even as they trailed analysts’ estimates.


All said, losing market share in California which is its single largest market is not good news for Tesla.


While it might resort to more price cuts in the future to increase sales, they might mean more margin compression for the company.


Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Comments


bottom of page