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Tesla’s decline in sales, a sign that its grip on the electric vehicle market is diminishing

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Tesla appears to be losing control of the market it effectively created after announcing a dramatic drop in quarterly sales on Tuesday, raising new questions about Elon Musk’s leadership of the company.

The sales decline caught investors off guard as rivals like China’s BYD and South Korea’s Kia and Hyundai reported a surge in electric vehicle sales, suggesting slowing overall demand for battery-powered models wasn’t the only explanation for Tesla’s problems.

Tesla pioneered the electric vehicle market with its Model 3 sedan and Model Y sport utility vehicle, which proved that battery-powered cars could be attractive, practical and profitable. These cars revolutionized the automobile industry and forced established automakers to develop their own electric models.

But the market is moving in ways that might not favor Tesla. Unlike the early adopters who fueled Tesla’s rise, traditional buyers may be turned off by the vehicles’ unconventional design, including their minimalist interiors and lack of buttons and switches. Almost all functions of Tesla vehicles are controlled from a large screen on the dashboard.

The system “makes it completely distracting to adjust almost anything going on inside the vehicle while driving on the road,” Consumer Reports wrote in a Tuesday review of a new version of the Model 3.

Tesla, which sells cars online and doesn’t have many showrooms, is often the target of complaints about poor service. That could be an advantage for established automakers, like Ford Motor and General Motors, which have large dealer networks and are ramping up their production of electric vehicles.

Tesla seems at a loss to respond to these challenges. It took time to follow up on its initial success with new models, and Mr. Musk appears disengaged. He did not react Tuesday to sales figures for X, the social network he owns and on which he posts prolifically. Instead, he took jabs at Walt Disney Company executives whom he accused of being “woke.” Such remarks have made him a hero in the eyes of conservatives, but could alienate liberals, who are more likely to buy electric cars, from Tesla.

You’re here 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 declined year-over-year since a slight decline at the start of the pandemic in 2020. The sales figures were also significantly below the estimates of Wall Street analysts who expected a slight increase.

“Tesla cannot 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 not yet clear how long they will be banned from entering the United States. »

More affordable cars would help Tesla attract a wider range of buyers, Mr. Rose said.

Certainly, some of the decline in sales may be due to production issues beyond the company’s control, including a fire in a Tesla factory near Berlin, following an arson.

And the company’s cars still have many fans. 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% this year — including a 5% drop Tuesday — amid concerns the company is losing momentum.

In China, Tesla faces BYD and dozens of other competitors with ambitions to expand globally. In Europe, established car manufacturers like Volkswagen And BMW have introduced more compelling battery-powered models. And in the United States, sales of electric cars aren’t growing as fast as they were a year ago, and many buyers are opting instead for hybrid models that combine a gasoline engine with batteries and electric motors.

Tesla’s competitors continued to report increases in sales. BYD announced Tuesday that it sold about 300,000 electric vehicles, an increase of 13% from the previous year. The company also sold 324,000 plug-in hybrid vehicles in the first quarter, an increase of 15%.

BYD and other Chinese automakers have introduced new models quickly, often at lower prices than Tesla. These companies are also increasingly exporting cars to Europe, Southeast Asia and Latin America.

South Korea-based Kia said Tuesday its U.S. sales of electric vehicles more than doubled in the first three months of the year from a year earlier, after introducing a new large vehicle sport utility vehicle, 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%.

Toyota, the world’s largest automaker, doesn’t sell many fully electric vehicles. But the company reported that U.S. sales of electrified vehicles, a category largely made up of hybrids, under the Toyota and Lexus brands, rose 74% in the first quarter.

Tesla pioneered mainstream electric cars, but its lineup is aging. The company’s only new model since 2020 is the Cybertruck, a futuristic pickup truck that went on sale in limited numbers last year. The cheapest version that Tesla says it can deliver this year starts at around $80,000, making it unaffordable for most car buyers.

Rivian, whose R1 pickup 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 be released in large numbers until 2026. In the meantime, Tesla remains dependent on the Model Y and Model 3 for the bulk of its sales.

The company has cut prices several times, but analysts say that strategy has cut into profits without doing enough to boost sales. The company recently slightly raised prices on some cars in the United States and China. The Model Y starts at nearly $45,000 before federal and state tax breaks, following a $1,000 increase announced this week.

Quarterly revenue shows Tesla executives “need a real sales strategy and can’t rely on price cutting alone,” said Gary Black, managing partner of Future Fund, an investment firm. investment, on X.

Mr. Musk, Tesla’s chief executive, has not given a clear indication of how the company plans to regain momentum. At the same time, his polarizing statements and support for right-wing conspiracy theories have alienated many leaders. left-wing customers who are most likely to buy electric cars.

Los Angeles resident Raphaelle Cassens ditched her rental Tesla Model Y last year and replaced it with a rental electric BMW i4. Mr. Musk is one of the reasons she changed her mind, she said.

“Honestly, I don’t like him at all as an individual,” said Ms. Cassens, who is a registered Democrat but describes herself as nonpartisan. She also said she received poor service from the company. “The attitude of the company definitely reflects that of the owner,” Ms. Cassens added.

At least one other major automaker is also struggling with electric vehicle sales. GM reported Tuesday that its first-quarter U.S. sales 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 is the result of a sharp decline in sales of the Chevrolet Bolt, which GM stopped making at the end of 2023. Sales of other electric models using GM’s latest battery technology have increased , but not enough to compensate. for the loss of the Bolt, which was one of the most affordable electric cars in the United States.

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