Tesla appears to be losing control of the market it essentially created after reporting a shocking drop in quarterly sales on Tuesday, raising new questions about Elon Musk's leadership of the company. There is.
Rivals such as China's BYD and South Korea's Kia Motors and Hyundai Motors have reported increased sales of electric vehicles, suggesting that a slowdown in overall demand for battery-powered models is not the only explanation for Tesla's problems. The decline in sales caught investors by surprise.
Tesla pioneered the electric vehicle market with its Model 3 sedan and Model Y sport utility vehicle, proving that battery-powered vehicles are attractive, practical, and profitable. This car revolutionized the auto industry, forcing existing car manufacturers to develop their own electric models.
But the market is evolving in ways that don't favor Tesla. In contrast to the early buyers who fueled Tesla's rise, mainstream buyers may balk at the vehicle's unconventional design, including its minimalist interior and lack of buttons and switches. Almost every function in a Tesla vehicle is controlled from a large screen on the dashboard.
The system makes “adjusting almost everything in the car while you're driving down the road a complete distraction,” Consumer Reports wrote in a review of the new version of the Model 3 on Tuesday.
Tesla sells its cars online and doesn't have many showrooms, so it's often the subject of complaints about poor service. This could be an advantage for established automakers like Ford Motor Co. and General Motors Co., which have extensive dealer networks and are ramping up production of electric vehicles.
Tesla seems at a loss to meet these challenges. Slow to follow up his initial success with new models, Musk appears to be losing motivation. He did not respond Tuesday to sales figures for social media platform X, which he owns and frequently posts on. Instead, he hurled harsh words at Walt Disney Company executives, accusing them of being “woke.” Those comments have made him a hero to conservatives, but they may be turning liberals, who are more likely to buy electric cars, away from Tesla.
Tesla said it delivered 387,000 cars worldwide in the first quarter, down 8.5% from 423,000 in the same period last year. It was the first time Tesla's quarterly sales have declined from a year ago since the company posted a modest decline early in the pandemic in 2020. Sales also fell significantly short of expectations from Wall Street analysts, who had expected a modest increase in sales.
“Tesla cannot stand still,” Ben Rhodes, president of Battle Road Research, said in an email. “Chinese EVs are already gaining a foothold in Europe, but it is unclear how long their imports into the United States will be banned.”
More affordable cars will help Tesla appeal to a wider range of buyers, Rose said.
Indeed, some of the decline in sales may reflect production issues beyond the company's control, such as an arson fire at a Tesla factory near Berlin.
And the company's cars still have many fans. Consumer Reports, while panning over the Model 3's controls, said the latest version has a better ride and improved handling than its predecessor.
But investors are clearly wary. Tesla stock has fallen more than 30% this year, including a 5% drop on Tuesday, on concerns that the company has lost momentum.
In China, Tesla faces BYD and dozens of other rivals aiming to expand globally. In Europe, established automakers such as Volkswagen and BMW are introducing more attractive battery-powered models. And in the U.S., sales of electric cars aren't growing as fast as they were a year ago, with many buyers opting instead for hybrid models that combine a gasoline engine with a battery and an electric motor.
Tesla's rivals continue to report increased sales. BYD announced on Tuesday that it sold about 300,000 electric vehicles, an increase of 13% year-on-year. The company also sold 324,000 plug-in hybrid vehicles in the first quarter, an increase of 15%.
BYD and other Chinese automakers rapidly introduce new models and often undercut Tesla's prices. These companies are also increasingly exporting cars to Europe, Southeast Asia, and Latin America.
South Korea-based Kia Motors said Tuesday that electric vehicle sales in the U.S. more than doubled compared to the same period last year in the first three months of this year after the launch of its new EV9 large sport utility vehicle. Kia Motors' sister company Hyundai said it sold more than 10,000 electric vehicles in the U.S. in the first quarter, an increase of 75%.
Toyota, the world's largest carmaker, doesn't sell many fully electric cars. But the company said U.S. sales of electric vehicles under its Toyota and Lexus brands, a category primarily made up of hybrid vehicles, rose 74% in the first quarter.
Tesla pioneered electric cars for the masses, but its lineup is aging. The company's only new model since 2020 is the Cybertruck, a futuristic pickup truck released in limited numbers last year. The cheapest version Tesla says it can deliver this year will start at about $80,000, putting it out of reach for most car buyers.
Rivian, which owns the R1 pickup truck that competes with the Cybertruck, said its sales, including that truck and two other models, rose 70% in the quarter to 13,600 units.
Tesla is working on an electric car that would cost around $25,000, but the model is not expected to be available in large numbers until 2026. In the meantime, Tesla still relies on the Model Y and Model 3 for the majority of its sales.
The company has repeatedly cut prices, but analysts say the strategy hasn't done enough to stimulate sales and has depressed profits. The company recently slightly increased the prices of some cars in the United States and China. Model Y prices start at nearly $45,000 before federal and state tax breaks, after his $1,000 price increase announced this week.
Gary Black, managing partner at investment firm Future Fund, told Posted.
Tesla CEO Musk has given no clear indication of how the company plans to regain momentum. At the same time, his polarizing rhetoric and support for right-wing conspiracy theories have alienated many of the left-wing customers most likely to buy electric cars.
Last year, Los Angeles resident Rafael Cassens traded in his leased Tesla Model Y for a leased BMW i4 electric car. She was one of the reasons Musk changed jobs, she said.
“Honestly, I don't like him at all as an individual,” said Cousens, who is registered as a Democrat but describes herself as an independent. She also said she received poor service from the company. “The attitude of the company is definitely a reflection of the owners,” Cousens added.
At least one other major automaker is also struggling to sell electric vehicles. GM reported on Tuesday that first-quarter U.S. sales fell 1.5%. This was mainly due to a decline in deliveries of battery-powered vehicles by about one-fifth to about 16,000 units.
The decline in battery-powered vehicle sales was due to a significant drop in sales of the Chevrolet Volt, which GM discontinued at the end of 2023. The loss of the Volt, which was one of the most affordable electric cars in the U.S., was not enough to offset the increase in sales of other electric models using GM's latest battery technology.
