Tesla appeared to be losing control of the market it effectively created after it reported a surprising drop in quarterly sales on Tuesday, raising new questions about Elon Musk’s leadership of the company.
The sales slump caught investors off guard, as rivals such as China’s BYD and South Korea’s Kia and Hyundai reported increases in electric vehicle sales, suggesting lower overall demand for battery-powered models. was not the only explanation for Tesla’s problems.
Tesla pioneered the electric vehicle market with its Model 3 sedan and Model Y sport utility vehicle, proving that battery-powered cars could be attractive, practical and profitable. The cars revolutionized the automotive industry and forced established automakers to develop their own electric models.
But the market is evolving in ways that may not favor Tesla. Unlike the early adopters who fueled Tesla’s rise, mainstream buyers may be put off by the vehicles’ unconventional design, which includes minimalist interiors and a lack of buttons and switches. Almost all functions of Tesla vehicles are controlled from a large screen on the dashboard.
The system “makes it very distracting to adjust almost anything inside the vehicle while driving down the road,” Consumer Reports wrote in a review Tuesday of a new version of the Model 3.
Tesla, which sells cars online and does not have many showrooms, is often the subject of complaints about poor service. That may provide an advantage to established automakers, such as Ford Motor and General Motors, which have extensive dealer networks and are ramping up production of electric vehicles.
Tesla seems unable to respond to those challenges. It has been slow to follow up its initial success with new models, and Musk seems out of touch. He did not react Tuesday to sales figures on X, the social media platform he owns and on which he posts prolifically. Instead, he leveled criticism at executives at the Walt Disney Company, whom he accuses of being “woke.” Such comments have made him a hero to conservatives, but they may be driving 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 percent from 423,000 in the same period last year. This was the first time Tesla’s quarterly sales fell year-over-year since a modest drop at the start of the pandemic in 2020. The sales figures were also significantly lower than estimates from Wall Street analysts who had expected a modest increase. .
“Tesla can’t stand still,” Ben Rose, president of Battle Road Research, said in an email. “Chinese electric vehicles are already gaining a foothold in Europe and it is unclear how long they will be banned from entering the United States”
More affordable cars would help Tesla appeal to a broader spectrum of buyers, Rose said.
To be sure, some of the sales decline may have reflected production problems outside the company’s control, including a fire at a Tesla factory near Berlin that was the result of an arson attack.
And the company’s cars still have many followers. While reviewing the Model 3’s controls, Consumer Reports said the latest version offered a better ride than its predecessor and had improved handling.
But investors are clearly alarmed. Tesla shares have fallen more than 30 percent this year (including a 5 percent drop on Tuesday) on concerns that the company has lost momentum.
In China, Tesla faces BYD and dozens of other rivals with ambitions to expand around the world. In Europe, established automakers such as Volkswagen and BMW have introduced more attractive battery-powered models. And in the United States, sales of electric cars are not growing as fast as a year ago, and many buyers are opting for hybrid models that combine a gasoline engine with batteries and electric motors.
Tesla’s rivals have continued to report sales increases. BYD said Tuesday it sold about 300,000 electric vehicles, up 13 percent from a year earlier. The company also sold 324,000 plug-in hybrid vehicles in the first quarter, up 15 percent.
BYD and other Chinese automakers have introduced new models quickly, often undercutting Tesla’s price. Those companies are also increasingly exporting cars to Europe, Southeast Asia and Latin America.
South Korea-based Kia said Tuesday that its U.S. electric vehicle sales more than doubled in the first three months of the year compared with a year earlier, after it unveiled a new high-performance sport utility vehicle. size, the EV9. Kia’s sister company Hyundai said it sold more than 10,000 electric vehicles in the first quarter in the United States, an increase of 75 percent.
Toyota, the world’s largest automaker, doesn’t sell many all-electric vehicles. But the company said U.S. sales of electrified vehicles, a category made up largely of hybrids, under the Toyota and Lexus brands rose 74 percent in the first quarter.
Tesla pioneered mass-market electric cars, but its lineup is aging. The company’s only new model since 2020 is the Cybertruck, a futuristic truck that went on sale in limited quantities last year. The least expensive version that Tesla says it can deliver this year starts at around $80,000, making it unaffordable for most car buyers.
Rivian, whose R1 truck competes with the Cybertruck, said its sales, including those of the truck and its two other models, rose 70 percent in the quarter, to 13,600 vehicles.
Tesla is working on an electric car that would cost around $25,000, but the model is not expected to go on sale in large quantities until 2026. Meanwhile, Tesla continues to rely on the Model Y and Model 3 for most of its sales.
The company has repeatedly cut prices, but analysts say the strategy has reduced its profits without doing enough to stimulate sales. Recently, the company has modestly increased prices on some cars in the United States and China. The Model Y starts at nearly $45,000 before federal and state tax breaks, after a $1,000 increase announced this week.
The quarterly sales figure shows that Tesla managers “need a real sales strategy and can’t rely solely on cutting prices,” Gary Black, managing partner at Future Fund, an investment firm, posted on X.
Tesla CEO Musk has not given a clear indication of how the company plans to regain momentum. At the same time, his polarizing statements and his endorsement of right-wing conspiracy theories have alienated many of the left-leaning customers who are more likely to buy electric cars.
Los Angeles resident Raphaelle Cassens gave up her leased Tesla Model Y last year and replaced it with a leased electric BMW i4. Musk was one of the reasons she changed, she said.
“Honestly, I don’t like him at all as an individual,” said Cassens, who is registered as a Democrat but describes herself as nonpartisan. She also said that she received poor service from the company. “The company’s attitude definitely reflects that of the owner,” Cassens added.
At least one other major automaker is also struggling with electric vehicle sales. GM reported Tuesday that its U.S. sales for the first quarter fell 1.5 percent, largely because deliveries of battery-powered cars fell by about a fifth to about 16,000 vehicles.
The drop in sales of battery-powered vehicles was the result of a sharp drop in sales of the Chevrolet Bolt, which GM stopped manufacturing at the end of 2023. Sales of other electric models using GM’s latest battery technology rose, but not enough to compensate for the loss of the Bolt, which was one of the most affordable electric cars in the United States.
