As Tesla faces slowing unit growth and implements price cuts that could potentially reduce its annual revenue by billions, investors are urging CEO Elon Musk to reconsider the company’s long-standing aversion to advertising.
Major automakers like GM and Ford spend over $20 billion annually on media campaigns, while Tesla has traditionally relied on word-of-mouth and social media for promotion.
Gary Black, a Chicago fund manager and Tesla supporter, has been vocal about his belief that Tesla should invest in advertising rather than continue with price cuts as a growth strategy. And now it seems others are joining him in demanding Tesla take more chances with advertising.
An online poll conducted by Tesla analyst @TroyTeslike found that half of the 8,000-plus respondents believe Tesla should start advertising. This sentiment was echoed at Tesla’s annual shareholder meeting, where Musk seemed open to the idea of advertising to promote Tesla’s unique features and functionalities.
“525 bucks off of every car this year is half of Netflix’s ad budget, and 1000 bucks is the entire Netflix ad budget and I see their ads everywhere. Why not advertise these things you told us about here?” said Kevin Paffrath, who runs The Meet Kevin Pricing Power ETF, speaking to CNBC.
Musk has previously said, “I think what you are saying does have some merit and I believe in taking suggestions and we’ll try a little advertising and see how it goes.”
Despite Musk’s openness, Tesla has made only minimal efforts in online and social advertising, according to Wedbush analyst Dan Ives. Meanwhile, Tesla’s recent price cuts are estimated to cost the company $2 billion annually. Tesla’s U.S. market share among electric vehicles has also been slipping, even as it lowers prices.
Black argues that Tesla’s price cuts are essentially a de facto marketing expense and suggests that the company should balance its reliance on price cuts with advertising to promote features like safety and over-the-air software updates. Tesla’s stock, although up about 140% this year, is still one-third below its 2021 peak and has trailed the S&P 500 over the last year.
The question remains: Will Tesla shift its strategy to include more advertising, and if so, will it be enough to boost sales and market share? Only time will tell.