Elon Musk turns to traditional advertising for Tesla

With Elon Musk outlining plans for Tesla to use traditional advertising for the first time, viewers might see the electric-vehicle maker’s Model Y crossover or upcoming Cybertruck pickup — maybe even the billionaire CEO himself — on TV or online.

Musk disclosed the plans on Tuesday at the company's annual meeting, an about-face for the celebrity executive who recently acquired social media platform Twitter. For years he has eschewed advertising in favour of seeking to capitalise on his star power and customer enthusiasm for Tesla's vehicles.

“We'll try out a little advertising and see how it goes,” he told investors in Austin, Texas.

Tesla shares closed 4.4% higher on Wednesday.

Musk said Tesla would not be immune to macroeconomic pressures he foresees over the next year. The EV maker's tweaking of prices in its major markets is a symptom of a company that no longer can take ever-higher levels of demand for granted in the face of growing competition.

Whatever advertising path Musk chooses, ad agency executives and investors expect a unique and irreverent take that will clearly communicate Tesla’s advantages, including its technology.

“Tesla has not been like every other car company, and he's not going to start now, so expect breakthrough creative that speaks to Tesla's disruptive technology and personality,” said Tal Jacobson, incoming CEO at advertising technology company Perion Network.

“His ability to use the media to amplify his brand and his company's brands is an art form,” Jacobson said of Musk.

Musk, who could not be reached for comment, told CNBC on Tuesday that he envisioned advertising that emphasised the features, safety and affordability of Tesla vehicles. A Tesla spokesperson declined to add anything beyond Musk's comments.

Musk told CNBC he did not yet have a “fully formed strategy” for Tesla advertising. He said it should be “informative about a product” and “aesthetically pleasing.” He added: “It should have some artistic element to it. And it should be something that you don't regret watching after it's done.”

While Tesla disseminates information about its vehicles via its Twitter account, Musk told CNBC that approach is “preaching to the converted and not reaching people that are not already convinced.”

In 2022, Musk touted the company's "$1-[trillion] valuation with $0 advertising spend” on Twitter.

Futuristic ads?

Some industry officials mused on whether Musk might attempt a memorable TV ad, perhaps akin to the famous “1984’ commercial for Apple's Macintosh computer which was directed by Ridley Scott and aired only during the Super Bowl. Many say that commercial, inspired by George Orwell's dystopian novel of the same name, paved the way for big-budget TV commercials.

“I don't think Musk would spend elaborately on a brand mosaic like Apple did, but ... minimalistic while futuristic is the approach I'd see him taking,” said Bob Gruters, chief revenue officer at streaming platform Loop Media.

Some wonder whether Musk may feature himself in the ads, although that may carry risk as the executive can be polarising.

“Is he an effective ambassador? My guess is that there is a less polarising, more motivating and compelling way to communicate the brand's benefits than using Musk as a spokesperson,” said Kimberly Whitler, a professor at the University of Virginia's business school.

While Musk did not outline a marketing budget, Tesla would likely be perceived as a high-profile account for top advertising companies, said Vivek Astvansh, assistant professor of advertising at Indiana University's business school.

Tesla spent $151,947 on advertising in the US in 2022, according to advertising intelligence firm Vivvix, which measured ads across places including TV, social media, Web banners and billboards. By comparison, Ford and Toyota spent $370m and $1.1bn, respectively, while the brands of General Motors collectively spent a total of $1.35bnn on US ads last year, Vivvix data showed.

GM last year spent $4bnglobally on advertising and promotions, while Ford spent $2.2bn on advertising, according to US regulatory filings.

TWITTER CONNECTION

Musk's “newfound passion for advertising,” in the words of author and venture capitalist Claire Diaz-Ortiz, was not surprising given his takeover of Twitter last autumn, she said. Diaz-Ortiz is a former Twitter manager who has written books about the social media company.

Last week, Musk named former NBCUniversal ad chief Linda Yaccarino as Twitter's new CEO.

“It is hard for Musk to own a social media company that requires advertising dollars to survive and then to dismiss, as head of a manufacturing company, the value of advertising,” University of Virginia's Whitler said.

Thomas Martin, senior portfolio manager at Tesla shareholder Globalt Investments, sees Musk's embrace of advertising as a positive. He expects the company to show how its products differ from its competitors'.

“Obviously they're going to have to focus on what's good for the environment and also that it is a car of the future as opposed to your father's Oldsmobile,” he said.

Reuters