The cost of taking sides: Political identity and the auto market

Business leaders have increasingly entered political debates in recent years. Through public statements or endorsements of political actors—and via channels like social media—CEOs can influence public discourse far beyond their companies. Do such signals also lead to economically meaningful changes in consumer behavior?

An IZA discussion paper by Johannes Buggle, Sebastian Butschek and Elian Tenschert examines how Elon Musk’s endorsement of the far-right Alternative für Deutschland (AfD) influenced demand for Tesla vehicles in Germany. In December 2024, Musk proclaimed on X that “Only the AfD can save Germany,” triggering widespread media coverage and a nationwide political debate.

Using detailed data on new car registrations and second-hand market listings across German districts, the study investigates whether Musk’s political stance changed consumer demand for Tesla vehicles across regions with different political orientations.

Political identity shapes car purchase decisions

The study finds that Musk’s endorsement polarized Tesla demand across Germany. After Musk’s Tweet, Tesla registrations increased in districts with stronger AfD support relative to more moderate regions. The strongest effect appears in the most right-leaning districts, where Tesla sales rose by up to 30 percent compared with left-leaning regions.

Before the endorsement, Tesla ownership was more common in areas with stronger support for the Green Party and lower vote shares for the AfD. Musk’s political engagement appears to have altered the perceived identity associated with owning a Tesla, leading consumers to reassess their purchase decisions.

These results suggest that highly visible, high-value durable products such as cars can serve as signals of political identity. When a brand becomes associated with a political stance, buying or avoiding the product may become a way for consumers to express values and affiliations.

No broader EV or resale shifts

The study finds no short-run substitution from Tesla to other EV brands: sales of competing electric vehicles remained largely unchanged across regions. This indicates that the demand shock was specific to Tesla. Nor did existing owners react by adjusting resale decisions: listings on a major second-hand platform show no partisan differences in posting a sales ad. This suggests that political signaling affected new purchases, while transaction and switching costs may have deterred resale responses.

Political activism carries economic risks

When politics enter consumer markets

The findings highlight how political polarization can shape economic behavior in consumption choices. When prominent business leaders publicly align with political ideologies, their products may become associated with particular political identities, which can affect purchase decisions and, in turn, firms’ sales.

In the case of Tesla in Germany, Musk’s endorsement of the AfD appears to have transformed the political identity associated with the brand, reshaping demand across regions with different political orientations. More broadly, the study shows that CEOs’ political activism can have measurable and economically significant impacts in markets for high-value, durable consumer goods.

Download the full paper here.