Can Tesla reclaim the electric vehicle crown?

You could say 2022 was the year when Tesla went off track. The EV giant has hit a bump in the road in recent times, not least in China, Tesla's biggest market, where rival BYD rounded off 2022 by overtaking Tesla as the world’s number 1 electric car seller.

According to data given by both firms, BYD, which is backed by Warren Buffett's Berkshire Hathaway, sold just over 1.9 million electric and plug-in hybrid vehicles globally in 2022, while Tesla sold slightly more than 1.3 million.

Tesla's financial performance has also been on a bit of a bumpy ride as of late. The company's share price decreased by 69% during the past year, and its valuation decreased to US$383.76 billion at the beginning of 2023 from US$1 trillion near the end of 2021.

Elon Musk, Tesla's CEO, is the first person to ever experience a US$200 billion fall in worth as a result of that decline. Some analysts have accused Musk of being too focused on his other acquisition Twitter. Additionally, it jeopardises the dominance of the automaker who were the first to introduce electric vehicles to the general public.

Whether Musk himself, his preoccupation with Twitter, increased competition, or a general slowdown amid rising interest rates and recession fears are to blame, it's clear that someone has taken their eyes off the wheel at Tesla. The company missed its own target of increasing annual deliveries by 50% or more last year. And recently Tesla was also fined US$2.2 million for alleged false advertising by South Korea's fair-trade commission.

So what does the road ahead have in store for Tesla? Can the darling of the EV world reclaim its crown? Will appointing China chief Tom Zhu as the highest-profile executive after Musk, with direct oversight for deliveries in all of its major markets and operations of its key production hubs, help to steer Tesla back on track?

Campaign asked brand experts to assess whether Tesla's current problems are more than just a bump in the road; whether Musk should still be in the driving seat, and what the company could do to fix its brand.

Kaitlin Zhang
CEO, Oval Branding

The challenge for Tesla is the amount of noise surrounding its brand, for example, Elon’s acquisition of Twitter, opinions about crypto and various lawsuits. What Tesla needs to do is to actively craft its brand image with Chinese consumers, perhaps with a shifted focus on its tech advancements with batteries and Autopilot, not just cars. It can also be extremely volatile for a corporate brand to be strongly linked to a personal brand, so Tesla and Elon Musk need to tread carefully. 

In Early Jan 2023, a small number of Tesla’s Chinese customers staged protests against price cuts. If Tesla can handle this situation well, it can turn this PR disaster into a clever way to advertise price cuts. As of today, Tesla hasn’t responded, which isn’t a promising way to handle crisis PR. 

Ed Booty
Chief strategy officer (CSO), Publicis Groupe APAC

I’m not sure that the odds are stacked against Tesla. I’d hazard a guess that most CEOs of legacy car brands would rather be in Elon Musk’s shoes than facing their own existential challenges; struggling to reinvent themselves to even remain competitive.

The electric vehicle market will undoubtedly see a multitude of new competitors, but it will also grow rapidly. Surely Tesla is better positioned than most to take advantage of this growth?

That said, Tesla sits at a precarious intersection as a flagship American icon, highly dependent on China for demand and manufacture, while increasingly competing with Chinese brands. Maintaining this entente cordiale will require delicate diplomacy, which is perhaps not Mr Musk’s strongest suite.

China’s road to recovery is likely to involve plenty of bumps—but this will challenge the category equally, so shouldn’t meaningfully impact Tesla’s market share.

However, I question whether Tesla should want to sell the most electric vehicles?

As the category matures, there will undoubtedly be an abundance of cheaper alternatives selling in large volumes. While Tesla is naturally looking to achieve greater scale, I would be surprised if it is seeking to compete in that space, given the equity and potential the brand currently has.

I still believe Tesla can become the automotive Apple. It has the credentials, the positioning, the product and the momentum. As with all ‘mass premium’ propositions it must manage the careful balance between accessibility and exclusivity. If it remains too niche it will miss the opportunity. If it becomes too mainstream it will lose its cachet. Disciplined brand stewardship will be required to achieve this.

Being first is not a sustainable competitive advantage, and with scale can come conservatism, complacency and inagility. So, as it comes of age and the category catches up, Tesla will soon need to become much sharper on what it stands for as a brand and what continues to differentiate it.

Arnold Ma
CEO and founder, Qumin

I think the odds are certainly stacked against Tesla. Global economy aside, rival car manufactures (traditional and new, especially in China) are starting to catch and in certain cases out pace Tesla on innovation and reach (E.g. Nio with 700+ battery swapping stations in China). Tesla still has brand equity on its side, which is why I am personally optimistic about their recovery. I think focusing on China will need to be a big part of its strategy for this to happen.

There are rumours the current Chinese Exec Tom Zhu may take the global CEO role. I think this move may provide a better chance for Tesla to bounce back; since Zhu took the post in 2019, Tesla saw a momentum in China. Should the new boss extend his expertise in EV business to the global market while continuing to leverage his insights on Chinese consumers, there is opportunity for Tesla to pull off growth. 

While BYD beat Tesla in terms of the overall sales, if we look at specific categories, Tesla defends its top spot in BEV sales, or pure electric vehicles, delivering over 340,000 more fleets than its rival BYD in 2022. This indicates that Tesla could potentially put more focus on these types of vehicles, like its Model 3, and position them to drive the overall growth. The Model 3 has proved to be a success in the Chinese market. Following its debut in China in 2019, Tesla replaced BYD to become the No.1 best EV seller and held the spot for the following three years.

Meanwhile, in response to the softening demand in China causing the overall gloomy climate of the economy, Tesla is trying to enthuse Chinese consumers with price cuts for its Model 3 and Model Y, coupled with insurance subsidies. It still waits to be seen how these efforts will play out for Tesla in the year to come.

Overall, I think Tesla should double down on its brand equity. Especially given Chinese counterparts are catching up (and often better) on innovations in functionality on top of narratives around sustainability are at the core. Tesla’s Chinese competitors are also getting better with supporting technology such as charging network alongside comprehensive after sale services to enable a decent customer experience. Therefore, I think Tesla should focus on building a strong lifestyle brand in China and abroad. Focus on where they are strong.

Martin Roll
Global brand expert and leadership advisor
Author of “Asian Brand Strategy”

Tesla with Elon Musk has always been a changemaker that showcased a new category in the auto market. People respected that. If the Tesla brand wants to come back, it needs a larger overhaul of operations, communication and marketing, and its leadership. In particular, it needs Elon Musk to tone himself down so that Tesla can shine more on its own for what it stands for—and not being overshadowed constantly by all the hype and negative Musk stories.

Tesla is a strong brand, but it runs the risk of losing its position if it does not innovate and mirror the quick and rapid response from the Chinese brands. The brand DNA is strong, but it needs to evolve and showcase a brand fit for a fight in a more mature and broader accepted category compared to just a few years ago. Sometimes being a first mover can limit success over time, as consumers evolve into new brands with more updated and edgy consumer offerings. Being second mover can play to its strength for the Chinese brands (and other Western brand stepping up too), so Tesla really needs to strengthen its innovation, technology and brand communication.

Tesla needs to innovate, upgrade communication and make sure overall that they have products and solutions that are fit for Asia and for China. They need to regain the spike they used to have and showcase to consumers that they stay current and updated, never sleep, and are a very relevant, differentiated and distinct consumer brand.

Tesla should focus on customer satisfaction. Happy customers are essential for the company success. By consistently delivering high-quality products and services and addressing customer needs and concerns, Tesla can build customer loyalty and keep their business competitive. Being in Asia—and in China in particular—can help inspire Tesla about what needs to be done.

Adam Charlton
Founder and design director, Brandcraft

Like Elon Musk, Tesla is unique. Unlike normal automotive corporations, Tesla does not chase market share or shareholder returns. Tesla is solely aligned with its mission: “to accelerate the world's transition to sustainable energy through increasingly affordable electric vehicles in addition to renewable energy generation and storage.”

Tesla acted true to this when in 2014 it gave away its patents, viewing competition as comrades with a shared purpose. Elon’s adventure and belief in Twitter share a similar overall humanitarian goal—to improve the future of civilization by recreating the "democratic town square". We can see similar purpose in SpaceX, disconnected from economics.

Shareholders want Elon to focus on Tesla to rebuild its market share and stock price, but whatever Tesla’s next moves are, we can be sure they will be in line with his overall mission. There is a lot of expectation around a new, accessible EV which could help Tesla’s market share in new markets and geographies such as Asia and South America. Whether we see a long-awaited super-accessible EV, mass public transportation or an AI 2-legged personal helper robot! We can only be sure that Tesla will disrupt again.

(This article first appeared on CampaignAsia.com)