Tesla Being Pushed By Shareholder To Use Paid Advertising

• by Laurie Sullivan  @lauriesullivan, May 29, 2020

Tesla shareholders will vote on whether the company will use paid advertising at the company's next meeting on July 7. The monumental move would change the direction of the car company, which has avoided such practices since July 2003.

Tesla CEO Elon Musk has made it clear that he intends to avoid advertising.

Musk, who tends to reinvest the company's revenue in improving products, has publicly said that Tesla will not advertise or pay celebrities to drive its cars. 

The vote to begin buying paid advertising is being pushed by San Diego-based Tesla shareholder James Danforth. In his proposal, he wrote:

“Advertising became necessary the moment Tesla announced in Q1 19 that it would shut down retail stores and start focusing solely on website based sales instead.” He added: “Tesla’s call to action via advertisements will ring loudly and credibly with billions of consumers, many of whom who don’t know who Tesla is at all. This call to action has never been more necessary or important than right now.”

Danforth’s proposal is included in Tesla’s proxy statement. 

Not all agree with Danforth’s proposal. Brand-name recognition sells the car in the case of automakers like Porsche and Tesla. These companies invest the money back into innovation.

“Think of Tesla as a phenomenon and phenomenon don’t need advertising,” said Trip Chowdhry, managing director at Global Equities Research. “It make more sense for them to reinvest the money into innovation.”

Chowdhry said the smart move is to use the money to create innovation, industry and factories because the company sells cars through brand recognition and provides jobs. He said smart companies like Tesla build gigafactories, which are very large manufacturing facilities.

Tesla’s pushback against using paid advertising is not new.

In April 2019, Musk replied “We don’t buy advertising” and “Our competitors do” to a tweet from a first-time Tesla buyer asking Musk how he and Tesla became “bad buys” in the #MSM? “I’m not conspiracy theorist, but there are a lot of other businesses at stake if you succeed I guess.”

The company has used influencers in China to promote its products, but that is about the extent of its use of paid advertising in the past.