Gary Black, a well-known figure in the investment community, has long been a fervent advocate of Tesla, one of the leading giants in the electric vehicle industry. Over the years, his unwavering support for the company has remained evident through his active presence on social media, where he consistently champions Tesla’s endeavors. However, recent concerns have been brewing in Black’s mind, primarily centered around what he perceives as a counterproductive strategy employed by Tesla – the relentless slashing of prices to fuel growth.
As Tesla grapples with a stagnating growth rate in the unit sales of its cars and SUVs, coupled with the prolonged anticipation of the Cybertruck pickup launch, Black strongly asserts that it’s time for Elon Musk, the driving force behind Tesla, to reconsider the company’s longstanding aversion to major media campaigns and embrace a more proactive advertising approach.
Black’s solitary crusade has recently garnered support within the domain of social media, a realm where Musk maintains a keen watch. A recent online poll conducted by @TroyTeslike, another zealous Tesla enthusiast on social media, indicated that half of the 8,000-plus participants believed that Tesla should embark on advertising endeavors, surpassing other growth strategies such as further price reductions and technological enhancements for the high-end Model S and Model X.
The mounting investor pressure did not emerge out of thin air. During Tesla’s annual shareholder meeting last May, Musk appeared somewhat taken aback, albeit slightly amused, when a shareholder, amidst a crowd dominated by Tesla enthusiasts, raised a critical question about the company’s advertising practices around 70 minutes into the meeting.
“Why not advertise these things you told us about here?” queried Kevin Paffrath, the founder of The Meet Kevin Pricing Power ETF in Southern California, highlighting the advantages of Tesla’s safety features, including airbag deployment technology, which could resonate with consumers through strategic advertising.
Musk, displaying a surprising receptiveness, acknowledged, “There are amazing features and functionality about Teslas that people just don’t know about.” He further added, “I think what you are saying does have some merit, and I believe in taking suggestions. We’ll try a little advertising and see how it goes.”
Despite the initial enthusiasm, subsequent developments failed to reflect a substantial departure from Tesla’s predominant reliance on price reductions to drive demand. According to Wedbush analyst Dan Ives, Tesla’s expenditure on online and social advertising has remained minimal, with major price cuts persisting as Musk’s primary strategy to invigorate interest in Tesla’s offerings.
The growing sentiment voiced by Black essentially urges Musk to reassess the balance between price reductions and advertising expenditures, emphasizing the importance of effectively communicating Tesla’s unique features, including the decreasing cost of electric vehicles and safety enhancements like over-the-air software updates. This call to action becomes particularly crucial in light of Tesla’s stock performance, which despite witnessing a 140% increase this year, still lags one-third below its 2021 peak and trails the S&P 500 over the past year.
Black argues that Tesla’s price reductions, in essence, function as a de facto marketing expense, citing the dwindling market share among electric vehicles as evidence that price cuts alone are insufficient in driving sustained demand. As Tesla continues to experience a slide in its U.S. market share, despite implementing price reductions, third-quarter deliveries and the resulting gross margins have faced noticeable setbacks, as indicated by Ives.
While the debate intensifies, industry experts stress the need for Tesla to develop a comprehensive marketing campaign that not only underscores the environmental benefits of electric vehicles but also accentuates their performance, luxury, and eco-conscious appeal. The increasingly competitive landscape in which Tesla operates necessitates a well-rounded advertising strategy that effectively communicates Tesla’s value proposition to a broader audience beyond its existing customer base.
The road ahead for Tesla undoubtedly hinges on its ability to strike a balance between pricing competitiveness and the strategic deployment of marketing communication. As Musk and the company continue to navigate this complex terrain, the convergence of price dynamics and marketing strategies will profoundly shape Tesla’s trajectory in the ever-evolving electric vehicle industry.