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Tesla (TSLA) is at a crossroads. Once the undisputed leader of the electric vehicle revolution, the company now faces a crisis that goes far beyond missed earnings or production delays.
It may not seem that way if you look at the stock, but if this continues, there’s definitely trouble ahead. Q1 2025 saw Tesla post its largest-ever sales drop and a 71% plunge in net income, even as CEO Elon Musk promised to shift his focus back to the company after a controversial stint in the federal government. But according to longtime bull Ross Gerber, the damage may already be done.
Tesla’s “Unprecedented Brand Damage”
Gerber said, “People don’t want the Tesla brand, I don’t know how you fix that.” JPMorgan analysts have also noted “unprecedented brand damage” affecting Tesla’s sales trajectory, which they described as more troubling than the market has acknowledged.
Gerber argues that Tesla’s problems are no longer just about missed targets or product recalls, they’re about a brand that has become “toxic” for many consumers. In his words, “The high-end EV business has totally eroded. The Cybertruck is basically not selling. The brand is broken and may not be fixable.”
Gerber blames the board for “negligence” and points to Musk’s polarizing political involvement and his role in the Department of Government Efficiency (DOGE) as the main drivers of the backlash. This political entanglement has sparked protests, vandalism at Tesla showrooms, and a wave of negative sentiment.
According to recent surveys, a majority of Americans now view Musk unfavorably, and that sentiment is bleeding into the Tesla brand itself. What’s most alarming is that even Musk’s promise to “allocate far more of my time to Tesla” has failed to convince Gerber and other skeptical investors that a turnaround is imminent. As Gerber put it, “There isn’t more that Elon could do to turn off customers from Tesla. I really don’t think there’s more he could do to turn off customers from Tesla. I really don’t think there’s more he could do.”
Brand Damage Hurts Tesla’s Fundamentals
In Q1 2025, Tesla delivered only about 337,000 cars, down from roughly 387,000 during the same period last year. The situation in Europe is even more dire, with sales dropping by 49% in early 2025.
Brand consultants attribute this decline to Tesla's evolution into what Eunice Shin, founder of The Elume Group, calls a “personality brand.”
“Tesla has completely lost its voice, its brand purpose, and the brand’s identity has become all about Elon Musk,” according to Shin.
This transformation has particularly alienated environmentally conscious consumers who initially embraced Tesla for its mission. Allen Adamson of Metaforce noted, “Now the focus has totally shifted from [Musk] sleeping on the Tesla factory floor and worrying about how to make the car better to wielding a chainsaw and being really involved in politics and the government,” he said. “By definition, he’s cut off half of the market. He’s so polarizing on his platform on X that he’s shot a torpedo through the Tesla brand.”
Could the TSLA Stock Rally Last?
Retail investors have been buying more TSLA stock due to Elon Musk returning his attention to the company and steering (no pun intended) the conversation away from the core business into robotaxis and Optimus robots.
The rally could be tempting, but the structural brand issues facing Tesla cannot be quickly resolved. TSLA stock is vulnerable, and as these dismal earnings reports pile up, the stock could plunge. Gerber estimates that the stock will go down to $125 (he saw 50% downside when the stock was at $250).
It’s unlikely TSLA is going to decline overnight, but if investors are disappointed by dreadful earnings reports quarter after quarter, it’s hard to see TSLA stock holding steady at 154 times trailing earnings.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
