Tesla’s sales took a hit last quarter, marking their first yearly decline since COVID-19. The company pointed to several factors: a sluggish Chinese economy, a fire at their German factory, and supply chain issues stemming from tensions in the Middle East.
While external factors like China’s economic slowdown, factory fires, and supply chain disruptions undoubtedly played a role, Tesla’s struggles might not be entirely external. The market’s natural evolution includes new competitors eventually capturing some of Tesla’s market share, and that seems to be happening now.
Part of Tesla’s challenge may be a slowdown in new product releases, potentially dampening customer excitement. Additionally, some consumers might be less inclined to buy a Tesla due to a shift in public perception surrounding CEO Elon Musk.
The U.S. electric vehicle market seems to be losing momentum. While EV sales have been growing steadily for a while, the past two quarters haven’t shown much significant increase, according to data from Cox Automotive. This suggests a potential plateauing of growth in the market.
A deeper look suggests the slowdown in electric vehicle sales might not be a general lack of interest in EVs, but rather a cooling off towards Tesla specifically.
While some reports suggest a general slowdown in electric vehicles, data paints a different picture. Analyst Stephanie Valdez Streaty from Cox Automotive highlighted that established automakers like Audi, BMW, Mercedes, and Rivian have all seen impressive growth in EV sales, exceeding 50% year-over-year. This trend was further emphasized by Ford’s recent announcement of an 86% increase in their own EV sales. These figures suggest that the electric vehicle market might be experiencing a shift in consumer preference rather than a complete stagnation.
Valdez Streaty stated that, after looking at the data, the slowdown is not general to electric vehicles but, a Tesla slowdown.
Tesla’s stock has plunged this year, falling around 30% due to underwhelming sales and profit figures. The company’s performance ranks among the weakest in the S&P 500 year-to-date.
While Tesla achieved a strong 38% sales increase in 2023 compared to the prior year, it fell short of investor expectations. The company further dampened enthusiasm by anticipating slower sales growth in 2024, as announced in January.
Tesla’s initial optimism for 2024 sales evaporated entirely. In fact, global sales in the first quarter took a nosedive, plummeting over 20% compared to the same period in 2023. This marks the first year-over-year sales decline for Tesla since the COVID-19 pandemic.
Tesla’s struggles aren’t a reflection of a cooling EV market in general. In the US, Tesla remained dominant with roughly 56% of electric vehicle sales in 2023 according to Edmunds.com. However, this is a significant drop from their peak of 80% market share in 2019. Declining Tesla sales might mislead some into thinking electric vehicles as a whole are losing appeal.
While US electric vehicle sales rose a respectable 15% in the first quarter of 2024 compared to the same period in 2023 (according to Cox Automotive), this growth masks a different story. Excluding Tesla from the data reveals a much stronger surge of 33% for competing electric vehicle brands.
Tesla’s dominance might be decreasing as their star performers, the Model 3 and Model Y, have been around for a while (seven and five years, respectively). Competitors like Ford, Audi, and Hyundai are now offering fresh electric vehicle options that capitalize on the latest advancements.
While Tesla’s Model 3 and Model Y are undeniably great cars, auto expert Valdez Streaty argues that the industry thrives on novelty. In his view, a flood of newer electric vehicles from competitors is likely dampening consumer interest in Teslas.
Tesla hasn’t commented on concerns about their aging vehicle lineup. Their recently launched Cybertruck, despite significant buzz, is still in low production. Additionally, their updated Model 3, while new, offers mostly minor changes.
Tesla faces a growing global threat from Chinese automakers like BYD, which Elon Musk himself considers the world’s most competitive car companies. However, for now, this competition isn’t directly impacting the US market, where BYD has yet to establish a presence.
Tesla CEO Elon Musk’s public statements have become increasingly divisive, potentially damaging the brand. Recent controversies include his defense of offensive remarks and his decisions related to social media platforms he’s involved with. These actions have raised concerns about Tesla’s commitment to social responsibility.
According to Caliber, a reputation management firm, Tesla’s brand image and consumer interest in buying its vehicles began a significant decline in early 2022. This timeframe coincides with Elon Musk’s acquisition of the social media platform previously known as Twitter. The data was first reported by Reuters.
Although Caliber’s data can’t definitively pinpoint the cause of Tesla’s decline, their research also revealed negative public perception of Elon Musk himself. Søren Holm, a Caliber executive, highlights the unusual strength of the association between Musk and Tesla in the public eye. Unlike most CEOs and their companies, Tesla’s fortunes seem to be more directly tied to Musk’s personal image.
Holm suggests Elon Musk’s immense fame and success might be a double-edged sword for Tesla. While his celebrity status brings positive attention, his recent actions might be generating negative publicity that overshadows the positive aspects.
Tesla remained silent on how Elon Musk’s pronouncements affect the company’s image. According to Caliber’s data, both Tesla and Musk have low “trust and like” ratings. Interestingly, the social media platform X (formerly known as Twitter) acquired by Musk in 2022 has also seen a recent drop in similar scores. This alignment suggests a potential connection between Musk’s leadership and declining public favor for these entities.
Tesla’s reputation began a significant decline in 2022, coinciding with Elon Musk’s vocal opposition to COVID-19 restrictions. This downward trend has persisted as Musk has made increasingly controversial public statements. Holm, describes Musk as cultivating a perception of being unpredictable and potentially reckless.
With new competitor models emerging that match Tesla in price, quality, and performance, Holm suggests that Elon Musk’s negative public image could become a significant deterrent for potential buyers. Holm emphasizes the growing importance of a CEO’s reputation in shaping a company’s brand perception.
