'Code Red' Warning from Tesla Bull: Musk Urged to Exit DOGE Involvement

Wedbush Securities analyst Dan Ives believes Elon Musk should take a step back from his controversial work at the Department of Government Efficiency and refocus his attention on Tesla Inc., adding that the electric-vehicle maker is facing a "code red" moment as it prepares to report first-quarter earnings on Tuesday.

"Musk needs to leave the government, take a major step back on DOGE, and get back to being CEO of Tesla full-time," Ives wrote in a report to clients Sunday. "Tesla is Musk, and Musk is Tesla....and anyone who thinks Musk's brand damage isn't real should speak with car buyers in the United States, Europe, and Asia. You'll think differently after those discussions."

Two weeks ago, Ives cut his price target for Tesla stock by 43%, citing a brand crisis caused by Musk and US President Donald Trump's trade policy. Ives' biggest concern has been that Tesla will be caught up in the backlash against Trump's tariff policies in China, where the company generated more than a fifth of its revenue last year. Musk has also become the face of Trump's efforts to reduce the size and scope of the federal government, infuriating progressive consumers who are important customers for the leading American electric vehicle manufacturer.

"Tesla has unfortunately become a political symbol globally of the Trump Administration/DOGE," Ives wrote.He then rattled off several points: Tesla's stock has plummeted since his inauguration, the company's first-quarter delivery figures were dismal, and protests against Tesla continue. The car maker is facing "potentially 15 per cent-20 per cent permanent demand destruction for future Tesla buyers due to the brand damage Musk has created with DOGE," Ives reported.

Tesla shares have fallen 43% since January 17. When the company reports earnings on Tuesday, there will be questions about volume sales in 2025, progress on autonomous driving and plans for a robotaxi network, and how tariffs will affect profitability. Everything revolves around Musk's role in the White House.

Musk, the world's richest person, is a special government employee, a term used to describe temporary federal hires who are only expected to work 130 days per year. People familiar with the situation said earlier this month that Musk is expected to step down from his position once his 130-day period is up.

Ives said he remains bullish on Tesla, maintaining an outperform rating and describing it as one of the "most disruptive technology companies on the globe over the coming years." However, he stated that Tesla's "most important asset" — Musk — must return to the company full-time.

"If Musk leaves the White House, the brand will be permanently damaged, but Tesla will have its most valuable asset and strategic thinker back as CEO full-time," Ives wrote. "We see this as a fork in the road time." "The future of Tesla could change and brand damage could increase if Musk decides to remain in the Trump White House."