Elon Musk Reveals Game-Changing Strategy for Tesla's Advertising Success!

Elon Musk Reveals Game-Changing Strategy for Tesla's Advertising Success!

Tesla CEO Elon Musk believes that advertising will only be effective for the company once their cars become more affordable, despite recent price cuts failing to drive demand

Elon Musk Reveals Game-Changing Strategy for Tesla's Advertising Success!

Tesla CEO Elon Musk has suggested that more price cuts may be necessary in order to stimulate demand for the company's electric vehicles.

In response to increasing competition, the company implemented several discounts earlier this year. However, during an overnight earnings call (18 October), Musk acknowledged that these reductions have not been sufficient to generate the desired level of demand.

"We must enhance the affordability of our vehicles, enabling their accessibility to a wider consumer base," he expressed.

In May, the company made a significant shift by deciding to incorporate advertising, which marks a departure from the principles established by Musk, who previously expressed his aversion to advertising and abstained from utilizing it at Tesla.

Yesterday, he acknowledged that the company had begun advertising, but emphasized the necessity of making their prices more affordable to stimulate demand.

"I am aware of the public's desire for our advertising," he expressed. "We are indeed advertising... there is potential for gains in our advertising efforts. However, simply informing individuals about an exceptional car that remains beyond their financial means does not truly assist them."

Musk emphasized the impact of increasing interest rates, noting that many customers pay for their vehicles in monthly installments. He explained that these rising interest rates have essentially negated the advantages of price reductions for these customers. As a result, Tesla has been compelled to modify the prices of its vehicles in order to maintain a comparable monthly cost.

In its latest quarter, Tesla saw a 5% increase in revenues to $19.63bn. However, the price reductions made by the company have had negative consequences. The total gross profit decreased by 22% compared to the same period in 2022, and earnings per share dropped by 44%. Our Website columnist Mark Ritson had previously cautioned that Tesla could be entering a price war, a situation that can be extremely challenging and potentially threaten the existence of manufacturers.

Tesla is confronted with formidable competition from more affordable competitors in key markets like China and the US. This has prompted certain financial analysts to advise the company to implement additional price reductions, indicating the initiation of a significant price war. Additionally, Ritson cautioned that these price cuts could potentially diminish the distinctive value of Tesla's renowned brand equity.

This strength that Tesla possesses is now posing as a weakness for the company. There is a possibility of self-inflicted harm with every significant discounting event," he warned.

Based on YouGov's BrandIndex tool, Tesla's brand health has seen a noticeable decline in the past year. Its index score, which serves as a general measure of brand health, has gone down from 2.2 at this time last year to -2.0 as of October 18, 2023. Although other factors, such as Musk's tumultuous takeover of Twitter (now called X), may have contributed to this decline, the brand's health is noticeably worse compared to last year.

Musk's confidence in the company's prospects seems to have diminished compared to 2022. In a similar timeframe a year ago, he assured investors that Tesla was resilient to recessions and expressed his unwavering belief in its ability to generate significant cash flow in any macroeconomic situation.

Yesterday he struck a more cautious tone: “Even a great ship in a storm has challenges,” he said.