Musk's ambitious promise of a return to growth in 2024, following Tesla's first annual delivery decline in 2024, is now under intense scrutiny. Wall Street is eagerly awaiting the Q1 delivery figures, set to be released on Wednesday, to assess the impact of the refreshed Model Y SUV and recent sales incentives.
A surge in competition, particularly from Chinese and European rivals, has compounded Tesla's challenges. Additionally, widespread protests against Musk's advisory role in federal spending cuts have alienated a significant portion of Tesla's traditionally liberal customer base. Data indicates a concerning trend of Tesla owners trading in their vehicles at unprecedented levels.
"We have witnessed substantial brand deterioration of Tesla globally," stated Ken Mahoney, CEO of Mahoney Asset Management, a Tesla shareholder. "The brand has become excessively politicized, a scenario detrimental to any public company."
The looming Q1 delivery report has already triggered a market response, with Tesla's shares plummeting over 7% on Monday and experiencing a 35% decline year-to-date. Wall Street's consensus, based on an average of 15 analyst estimates from Visible Alpha, projects approximately 373,000 deliveries for the January-March period—a 3.6% decrease from the 386,810 vehicles delivered in the same period last year.
However, many investors and analysts believe even this updated average estimate is overly optimistic. "I anticipate figures below 400,000, potentially as low as 350,000," remarked Thomas Martin, senior portfolio manager at Tesla shareholder Globalt Investments. Deutsche Bank analysts have offered an even more conservative estimate, forecasting deliveries between 340,000 and 350,000.
The company and Musk have not responded to requests for comment regarding these projections.
Data from automotive associations and analyst estimates consistently reveal sharp declines in Tesla sales across the U.S., Europe, and China during the first two months of the year. Beyond broader economic concerns curtailing large purchases, anticipation surrounding the refreshed Model Y has further delayed sales.
The updated Model Y, featuring new lighting, interior enhancements, and a rear-seat touchscreen, has recently launched in China and is arriving this month in the U.S. and Europe. However, "The refreshed Model Y could stimulate demand, but a delay is possible as customers await a more affordable Tesla model," explained David Wagner, head of equity and portfolio manager at Aptus Capital Advisors. Tesla has announced plans for a more budget-friendly vehicle based on existing platforms but has yet to disclose specific details.
Adding to Tesla’s worries is the poor response to their new Cybertruck vehicle. Demand for the Cybertruck, launched in late 2023 after multiple delays, has been underwhelming, hindered by its polarizing design and inflated price. Furthermore, quality issues have plagued the vehicle, leading to a recent recall of nearly all Cybertrucks in the U.S. to rectify a potentially dangerous exterior panel detachment.
Political Backlash, Fierce Competition, and Tariff Threats Challenge EV Giant
Tesla, once the undisputed leader in the electric vehicle (EV) market, is facing a multi-pronged assault that threatens its global dominance. A combination of political backlash, intensifying competition, and looming tariff threats are creating significant headwinds for the company.
- European Sales Slump Amidst Political Controversy
In Europe, Tesla's sales have experienced a troubling decline during the first two months of the year, despite the company's efforts to stimulate demand through discounts and attractive financing options. Analysts attribute this downturn, in part, to a growing consumer aversion to Tesla CEO Elon Musk's vocal support of right-wing political ideologies. This political polarization appears to be impacting brand perception and purchase decisions across the continent.
- Chinese Market Under Pressure from Local Rivals
Tesla's position in China, a crucial market, is also facing formidable challenges. Domestic competitors, led by BYD, have launched an aggressive price war and introduced at least six new models in the past year specifically designed to rival the popular Model Y. The resulting surge in competition has significantly eroded Tesla's market share in the region.
- Global Protests and Domestic Unrest
The growing tide of discontent has manifested in "Tesla Takedown" protests across multiple countries, including Germany and Finland, amplifying criticism against Musk's actions and statements. Domestically, these protests have coincided with incidents of vandalism at Tesla stores and vehicles set on fire in Las Vegas. Furthermore, concerns have been voiced about Musk's influence on federal workforce reductions and the termination of humanitarian initiatives.
- Tariff Threats and Potential Retaliation
While Tesla is likely to be less impacted than its competitors by the recently imposed 25% tariffs on imported vehicles and parts – due to its lower reliance on foreign parts and its domestic vehicle production – the company acknowledges that the cost implications will not be negligible. Tesla has also warned that it faces the risk of retaliatory tariffs, which could arise in response to the levied duties, potentially further straining its financial performance and competitive edge.