A Cult of Personality can Lead to Great Valuations, But it Can All Crash Just as Fast…

No prizes for guessing that we’re talking about Elon Musk and Tesla.

At the close of 2024, Tesla – the most valuable carmaker in the world – had a market cap of $1.3 trillion. Just four months later, amidst a Trump tariff-induced market devastation, that’s down by $425 billion (with a “B”) to a “mere” $875 billion.

Conversely, the largest carmaker in the world, Toyota, has a market cap of $275 billion, despite producing over 9 million cars versus less than 2 million for Tesla and reporting a $30 billion profit – almost double of what Tesla made in the preceding calendar year.

Clearly what this means is that the cult of personality is still very much intact – but dented severely, and possibly permanently, because of the political leanings of the world’s richest man. In fact, after Musk’s support for a far-right German political party, Tesla’s sales in Germany fell by 74% in February this year. And, in a survey of 100,000 Germans, 94% of respondents said they would never consider buying a Tesla ever again. In fact, sales across Europe fell by almost 50% in the first two months of the year, as the Trump Administration admonished Europe quite publicly immediately after taking Office.

Tesla’s valuations skyrocketed over the past decade, as the traditional OEMs struggled to play catchup in the midst of a paradigm shift. Tesla soon became a posterchild – not just for the environmentally conscious, but also the tech-forward and even those who were smitten by its supercar-rivalling acceleration. Now, the challenge is three-fold – 1. the established OEMs, while still playing catchup, are at least within striking distance, 2. EVs, as a whole, have lost some of their shine as ICE is putting up a real fight, and 3. Musk’s political involvement has taken a toll on the Tesla brand. It no longer stands only for the cutting-edge tech that it develops, but also the divisive views of its CEO. Tesla, once the favourite of the liberals, hasn’t quite been able to cover up the shortfall after it’s shift to the Right. After all, conservatives tend to prefer their Ford F150s.

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So, where does that leave Tesla? Well, very vulnerable indeed. It would never have shot to the top of the financial markets without the appeal of its genius CEO – and he is a genius make no mistake. But perhaps not as astute in anticipating what his involvement in politics could mean for his businesses. Or maybe it was just a miscalculation?

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What looked like a masterstroke after the US elections appears to have unravelled as quickly as his cult of personality. Tesla’s brilliant designers and engineers will be wondering if there’s anything at all they can do to get the brand out of this mess. But this is clearly beyond their pay grade. Elon’s allure got the brand to where it is today, and his downfall could bring it crashing down as well. He’s clearly stepping back from the political limelight, but the question is this – once that allure is shattered, is it possible to put the pieces back together unscathed or will it it leave a scar forever? I’m afraid, only time will tell…