Tesla’s CEO Elon Musk completed his Twitter acquisition last week. Several leading personalities have already quit the microblogging site and automakers are especially in a crosshair over advertising on the platform.
General Motors became the first automaker to temporarily pause ads on Twitter.
In its email response to CNBC, General Motors said, “We are engaging with Twitter to understand the direction of the platform under their new ownership. As is normal course of business with a significant change in a media platform, we have temporarily paused our paid advertising. Our customer care interactions on Twitter will continue.”
Notably, Tesla is no more a niche automaker and with expected deliveries of around 1.4 million this year, it is in the league of major automakers. Tesla competes with legacy automakers like Ford, General Motors, and Volkswagen as they ramp up their EV (electric vehicle) production.
Legacy automakers have big plans for electric cars. General Motors, for instance, is targeting an annual EV production capacity of 1 million cars in the US by 2025. By 2035, it intends to sell only zero-emission vehicles.
Legacy Automakers are Ramping Up Their EV Production
Ford has set ambitious plans for its EV business. It expects its annual EV production run rate to reach 600,000 by the end of 2023 and 2 million by 2026. The company had previously restructured the business between the electric and ICE (internal combustion engine) business.
Starting next year, Ford would start reporting the results for Ford Blue, which is the traditional ICE business, Ford Model e, which is the electric vehicle business, and Ford Pro, which is the commercial vehicle business, separately. This would give markets better insights into the performance of Ford’s EV business. We have a guide on how to buy Ford stock.
Musk has Mocked Gasoline Cars and Legacy Automakers on Twitter
An avid Twitter user, Musk has mocked gasoline cars as well as legacy automakers multiple times in the past. Automakers maintain a presence on Twitter but after Musk has taken over the social media company, they might want to reconsider their advertising on the platform.
Notably, Fisker’s CEO Henrick Fisker quit Twitter when Musk announced the acquisition. The company however maintains a Twitter presence. There are multiple reasons why automakers are getting wary of advertising on Twitter.
Firstly, there are concerns over hate speech on Twitter under Musk’s control. As a self-proclaimed “free speech absolutist” Musk has signaled the easing of hate speech guidelines on the platform. While conservatives have been pleased with Musk taking over Twitter, a lot of Democrats have quit the platform.
Reports Suggest Rise in Hate Speech on Twitter
Incidentally, reports suggest that there has been a surge in hate speech on Twitter after Musk took over. Musk had even offered to restore Donald Trump’s Twitter account which was suspended following the Capitol Hill violence.
Secondly, for all practical purposes, Musk and Tesla are the biggest rivals for legacy automakers. Automakers might be in a crosshair over advertising on a platform owned by their biggest rival.
Tesla’s Vehicle Deliveries Are Rising at a Fast Pace
For the last many quarters, Tesla has said that its deliveries would rise at a CAGR of 50% over the foreseeable future. During the third quarter earnings call, it said that while in some years the delivery growth would be below 50%, in others it would surpass that number, bringing the average to 50% or higher.
While Tesla missed revenue estimates in the third quarter, Morgan Stanley maintained its buy rating on Tesla stock. After President Boe Biden signed the Inflation Reduction Act of 2022, several Wall Street analysts turned bullish on Tesla.
During the Q3 2022 earnings call, Musk also said that he overpaid for Twitter. Notably, Musk had walked out of the deal to buy Twitter. However, he eventually relented.
Musk’s change of heart came shortly ahead of his deposition. Most legal experts were of the view that Musk stood little chance in his legal battle against Twitter.
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