A recent survey of Morgan Stanley's 2024 interns found that the "Tesla 'cool factor' is cooling" among GenZers in the US.
And it's been cooling for a while now.
The EV giant declined to 11% as the most desirable brand for the Morgan Stanley interns, compared to 14% last year, 19% in 2022, and 30% in 2021, the study said. Instead, Mercedes led in desirability with 19%, and BMW jumped from 13% last year to 16%, according to the survey.
Dwindling interest from the next generation of car buyers is a troubling sign for Tesla, which is already struggling to sell cars amid increasing competition. Tesla's deliveries fell for the second straight quarter, and its US market share fell below 50% for the first time in the company's history.
Ivan Drury, director of insights at Edmunds, a vehicle inventory and information company, told Business Insider that declining interest in Tesla among Gen Z may not be due to the product "being the problem so much as the personality associated with it," in reference to CEO Elon Musk.
Musk has certainly been stirring up a lot of negative attention, from repeatedly spreading misinformation online amid his political shift to the right and misgendering his Gen Z daughter, who is trans, to clashing with the UK prime minister and facing multiple lawsuits filed against him as well as the companies he runs. The divisive billionaire has often taken to X, formerly Twitter, to comment on controversial topics such as trans rights, the Ukraine war, diversity, and immigration.
Drury said Gen Zers are paying attention.
"I'm assuming that they're a little more conscious of what's happening, and they are on social media more often," Drury said. "I think that his latest antics have really cost the company. It's caused problems that never needed to exist."
While Tesla's CEO might need to do less to win back their favor, Drury said that the car company's products need to do more.
"When you copy and paste over and over again, and then when you have freshens or redesigns that aren't bringing anything meaningful to the table, you're going to lose market share," he said.
Despite competition in the EV market becoming stiffer than ever, Tesla has not had major refreshes to their aging car models in years. Musk said there weren't any plans to update the popular Model Y, which came out in 2020. Model S and Model X have also not been significantly upgraded since 2021.
Instead, Musk has been pivoting Tesla's future toward robotaxis, but Gen Z doesn't seem interested. The study of Morgan Stanley interns found that 19% of those surveyed would not use a robotaxis.
Drury said that while autonomous cabs would be useful in theory, in actuality, they're "completely not practical at all."
"It only will work for people who don't own a car and have no intentions of owning one," he said.
Robotaxis will likely not be Tesla's saving grace, as 51% of Gen Z surveyed think owning or leasing a car will still be necessary by 2030.
And, for the Gen Z interns surveyed, it probably won't be an EV at all.
The study found that preference for EVs decreased for the second year in a row, dropping to 15% versus 22% last year and 30% in 2022. While electric cars may be the cleanest, they're not the easiest to own, especially for fresh-out-of-college consumers.
"Gen Zers probably don't have the opportunity as often to charge as, say, somebody who has a single-family home," Drury said.
A recent consumer study conducted by McKinsey found that 46% of US EV owners said they were likely to switch back to a gas-powered vehicle, and 29% of global EV owners said they were likely to switch back to an internal combustion engine.
Respondents in 9 major countries said the top reason was the lack of charging infrastructure, including lack of at-home charging and limited long-distance driving, BI previously reported.
Drury said that even if some EVs are the cheapest vehicles on the market, younger generations will likely avoid them due to their inconvenience.
"If this EV doesn't allow me to live my life with some level of ease, then it's just not an option," he said.
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