Draining the Moat: A Cautionary Tale for Outspoken Executives

For years, Tesla stood as a totem of progress, an emblem of the future – one that allowed environmentally conscious consumers to align their personal values with their purchasing decisions. However, that narrative has rapidly unraveled. The data is striking:

• US: Tesla sales are projected for a QoQ decline of about 17% and the stock has plummeted over 50% from December '24–March ‘25 resulting in a decapitalization over $800B. Cars and dealerships are targets of vandalism. The President is threatening to prosecute further dealership vandalism as “domestic terrorism.”

• Germany: Tesla vehicle registrations plummeted 76% in February year-over-year, despite booming EV sales. Experts attribute this to Elon Musk’s public support for the far-right Alternative for Germany (AfD) party.

• Australia: Tesla sales fell 72% YoY in February, as Musk’s political alignments alienated environmentally conscious consumers.

• Sweden, Norway, and Denmark: Tesla sales dropped 42–48% in early 2025, driven by both aging models and Musk’s controversial statements.

Former Tesla loyalists now find themselves distancing from the brand. Here in Seattle, we’ve even spotted some drivers removing their Tesla logos to avoid unwanted associations (nice Mazda!). The question isn’t just about sales – it’s about perception. What happened to Tesla’s once-formidable brand moat?

The Brand Moat

Warren Buffett has referenced the term "moat" more than 20 times in Berkshire Hathaway’s shareholder letters from 1986 to 2012. Morningstar defines a moat as a company’s ability to maintain a lasting advantage through factors such as switching costs, network effects, cost leadership, and – most relevant here – intangible assets. Once confined to financial strategy, the concept has gained traction in the branding world, often focused specifically on those intangible assets. If you are a LinkedIn user, you’ve probably noticed an uptick in use of the “m” word that coincided with the proliferation of VC involvement of DTC brands over the last decade to add value to the potential sale of the brand.

Tesla’s Vanishing Moat

Tesla’s brand moat was built on innovation, cutting-edge technology, and a strong emotional connection with consumers. More importantly, Tesla’s audience identified with the company’s mission: to accelerate the world’s transition to sustainable energy. The alignment between brand values and customer values – along with its dominance in the nascent EV category – created the foundation for an expansive moat that endured for years.

However, Elon Musk’s increasingly polarizing actions: political endorsements, erratic behavior, xenophobic statements – just to name a few – have bulldozed this foundation. When an executive (or even an influencer or spokesperson) becomes synonymous with the brand, their personal reputation can either further excavate or erode the moat. In Tesla’s case, the latter has occurred, causing a rift between the company and its once-loyal customer base.

How the Moat Functions and How It Fails

A brand can dig the channel for a moat, but it cannot supply the water. The water comes from customers who align with the brand’s values, trust its leadership, and advocate on behalf of the brand. When customers feel alienated, they leave the brand, the moat dries up, and you’re left with just a hole in the dirt (i.e. revenue and sales free-fall).

While we don’t have a concrete definition of what constitutes the moat for brands (and it can change based on several factors), some key brand perception-related KPIs that signal a receding moat include:

• Brand Loyalty (NPS): A declining Net Promoter Score suggests eroding advocacy.
• Consumer Sentiment Analysis: Shifts in social listening data can indicate a brand in distress.
• Customer Retention & Churn Rate: Are customers leaving due to a misalignment with leadership?
• Brand Trust Metrics: A decline in consumer trust often precedes financial downturns.
• Brand Differentiation: Tesla was once singular. Today, many alternatives exist.
• Share of Voice (SOV): A diminishing presence in positive conversations signals waning relevance.
• Margins: Customers are no longer motivated to pay a premium for the brand. Notably, sales are a trailing indicator, not a leading one. By the time revenue declines, the damage is already done.

Lessons for Founders and Executives

Many founders believe that their personal success in one domain grants them universal credibility. But brand loyalty is not just built on product or leadership – it is built on alignment.

We witnessed this firsthand at Amazon. The brand perception – for better or worse – was heavily correlative with the perception of Jeff Bezos, even after he stepped down as CEO. This may have been less virulent because unlike Tesla’s predominantly left-of-center customer base, Amazon’s customers are more broadly representative of American demographics and political persuasions. However, both Amazon and Tesla’s respective predicaments highlight a key branding lesson: as a marketer, you can only control so much of the brand image equation. Ultimately, you are at the mercy of your customers and the general public as to the sum total perception of the brand.

Not every company or category needs a moat, but those whose products reflect personal identity – such as autos in Tesla’s case – must maintain alignment between leadership actions and consumer values. When that alignment evaporates, so does the moat.

Lessons for Marketers

This presents three major challenges for marketers. First, while marketing typically helps develop brand values, it often has little influence over how those values are implemented and measured across the business (you’ll remember we highlighted this challenge in our piece on brand values here). Second, in larger companies, these scenarios tend to be handled by PR, which often takes a reactive, crisis-management approach – focused more on controlling the narrative than addressing underlying issues. Lastly, providing critical feedback to leadership, especially on subjective matters like personal conduct and brand perception, is inherently difficult. The best approach is to use the KPIs above to build a data-driven case that demonstrates how leadership behavior affects business outcomes. However, by the time such an argument is necessary, significant damage may already be done, making recovery unlikely without board or shareholder intervention.