A Tesla Model X with its doors open is showcased in a showroom. Gary Black, a fund manager from Chicago, has been a strong supporter of electric-vehicle giant Tesla for some time now. However, he believes that Tesla is wasting money on price cuts in order to maintain high growth rates. Black argues that Elon Musk, the CEO of Tesla, should reconsider his opposition to spending on major media campaigns.
Recently, Black’s campaign has gained traction on social media, an area where Musk pays close attention. A poll conducted by @TroyTeslike, another active Tesla fan on social media, found that half of the respondents believed Tesla should start advertising. This result surpassed other growth strategies such as price cuts and adding technology to high-end models.
This pressure from investors and fans is not entirely unexpected. At Tesla’s annual shareholder meeting in May, a shareholder challenged Musk on the issue of advertising. The shareholder specifically mentioned safety features as a selling point that could be promoted through advertising. Musk expressed openness to the idea and promised to try a little advertising.
However, since then, Tesla has spent very little on online and social advertising, according to analyst Dan Ives. Instead, the company has continued to rely on price cuts as its primary strategy to generate more interest in its vehicles. Black argues that Tesla’s price cuts are essentially a form of marketing expense and that the company’s market share in the EV industry suggests that price cuts alone are not enough.
Tesla’s market share among EVs in the US has been slipping, despite the price cuts. In the third quarter, Tesla’s deliveries were below analyst projections, and the company blamed planned factory downtime for the decrease. The price cuts are also affecting Tesla’s gross margins, which have dropped significantly.
Black suggests that Tesla should reconsider its focus on price cuts and invest more in advertising to highlight the features and benefits of its vehicles, such as the falling cost of EVs and safety features. By connecting with buyers on what they truly care about, Tesla can create a more effective ad campaign. Other automakers, such as Ford and General Motors, have already heavily invested in advertising their EVs, and Black believes Tesla should follow suit.
Tesla does not necessarily need to spend as much as its competitors on advertising, but a focused campaign could help highlight Tesla’s unique advantages and sustain its luxury brand image. Black believes it is worth exploring whether advertising can help Tesla achieve its goals of volume and operating margins.
In an ironic twist, Musk himself admitted at the annual meeting that people still consider Teslas to be expensive. This further emphasizes the need for an effective advertising campaign to change these perceptions and showcase the affordability and benefits of Tesla vehicles.
Ultimately, whether or not Tesla decides to invest more in advertising remains to be seen. However, the growing support for this idea suggests that it may be worth considering. Advertising could help Tesla reach a wider audience and increase demand for its vehicles, ultimately contributing to its growth and success in the EV market.
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