Tesla CEO Elon Musk at the Gigafactory Berlin-Brandenburg. Attacks in the Red Sea forced the plant to shutdown in January. Then, “ecoterrorists” shut it down again in March. Photo / Getty Images
Tesla CEO Elon Musk at the Gigafactory Berlin-Brandenburg. Attacks in the Red Sea forced the plant to shutdown in January. Then, “ecoterrorists” shut it down again in March. Photo / Getty Images
For Elon Musk and Tesla, 2024 has so far been a rough year.
First, attacks in the Red Sea forced the shutdown of Tesla’s Berlin gigafactory in January. Then, “ecoterrorists” shut it down again in March.
To top it off, mounting competition from Chinese rivals forced the company to slowproduction in Shanghai in the face of weaker sales.
It has culminated in what analysts have called a “nightmare” quarter in which sales fell for the first time in four years.
On Tuesday, Tesla reported it had delivered 386,810 cars in the three months ending in March, substantially down on the 422,875 it delivered during the same period a year earlier.
The drop, the first since 2020, was far below even the most gloomy expectations of investment analysts.
Tesla’s shares fell 7 per cent in early trading in New York, extending a slide that has seen its valuation more than half from an eye-watering peak of US$1.2 trillion in 2021.
The company blamed the tough start to the year on teething problems with the production of its updated Model 3 at its Californian factory and “factory shutdowns resulting from shipping diversions caused by the Red Sea conflict, and an arson attack at Gigafactory Berlin”.
Tesla is now worth about US$550 billion ($922b) — still well ahead of that of the next most valuable car maker, Toyota, at just over US$300b.
But investors are now looking at Tesla without the rose-tinted spectacles. Wall Street analysts have issued successive downgrades to the company’s stock amid concerns about slowing sales and a perceived drop-off in innovation.
Colin Langan, an analyst at Wells Fargo, said in March that Tesla was now being valued like a “growth company with no growth”.
The electric car company’s stock is down roughly a third so far this year, despite a widespread surge in other technology stocks. The Nasdaq index is at record levels — up about 11 per cent in 2024.
Tesla shares slumped 6 per cent after it revealed its first fall in sales since the pandemic lockdown-hit 2020, wiping US$35 billion from its market cap. Source / Bloomberg
While there is little doubt Musk succeeded in transforming the car industry and accelerated the adoption of electric cars, its breakneck growth has since gone into reverse.
Inflation and higher charging costs have dampened electric car demand, says Richard Windsor, an independent technology analyst, while buyers are increasingly coming to the “realisation that as an EV user today, you are a beta tester”.
BYD has eclipsed Tesla in worldwide sales, and in its home market of China where Elon Musk's firm has been forced to cut prices on its ageing Model 3 and Model Y cars to compete. Source / Tesla, BYD
This is more true for Tesla than most. While other EV users must contend with clunky charging infrastructure or questionable claims about range, Tesla customers are expected to pay for features such as “self-driving” technology that have been delayed for years.
Musk’s business is also facing competition in China, one of its biggest markets, on a far greater scale than it has ever endured in the West. “Brutal Chinese competition” has forced Musk to cut prices as “the Chinese have figured out how to make decent cars”, Windsor says.
China’s BYD stole Tesla’s crown as the biggest electric car company by sales in the world at the end of 2023.
Tesla is scheduled to report first-quarter financial results on April 23. Analysts expect a quarterly profit of US$1.8 billion, down 27 per cent from the first three months of 2023 as the company’s recent price cuts weigh on profitability. Source / Tesla
Musk has acknowledged Tesla is in a rut, but insisted the company is simply “between two major growth waves”. It continues to work on a new generation of cars and hopes to attract buyers with its “self-driving” technology.
Tesla evangelists will argue its disappointing numbers on Tuesday represent little more than a pothole rather than veering off course.
Dan Ives, a technology analyst at Wedbush Securities, said the start of 2024 had been a “nightmare quarter” for the car maker largely because of events outside of its control.
Supply chain issues triggered by Houthi attacks on ships in the Red Sea put the brakes on Tesla’s production lines in Europe in January.
Weeks later, its German plant at Grunheide, in Brandenburg, was subjected to an arson attack, damaging an electricity pylon that supplies the plant. A local far-left environmental group calling itself Vulkangruppe (volcano group) claimed responsibility. Musk decried the group as the “dumbest ecoterrorists on Earth”.
The Tesla South showroom and service centre opened in South Auckland in July. Photo / Dean Purcell
However, a more significant challenge has emerged in China. The strength of BYD has made Tesla a tougher sell in the crucial Chinese market, where it has been forced to cut prices on its ageing Model 3 and Model Y cars to compete with the domestic upstart.
This week, Tesla began a major upgrade of its Full Self-Driving software, which will make driverless features such as automatic navigation more widely available. The software update insists drivers must maintain control of the car — calling it “supervised” self-driving.
It is hoped the new feature will be a selling point for drivers. However, while long touted by Musk, the upgrade could further delay sales, at least initially.
The billionaire has ordered Tesla sales staff to undertake a full test drive with every new customer to demonstrate the technology in a bid to show people how good it is. However, Musk admitted in an internal email that this requirement “will slow down the delivery process”.
Broader slide
The stock slide has coincided with a broader souring on electric cars more generally as demand for new EVs falters. Small US challenger Fisker has seen its shares plunge 99 per cent, while shares in Lucid Motors are down 94 per cent from their peak.
Windsor, the technology analyst, says Tesla’s valuation is “still silly”.
Regardless, it is a brave investor who bets against Musk. Its models remain the top electric vehicles by sales in the UK and the US. Its US$60,000 cyber truck, with its retro-futuristic design, has enjoyed strong demand.
It will launch a luxury Roadster next year to appeal to affluent buyers and it is rumoured to be working on a US$25,000 car to compete with its Chinese rivals. Tesla could even begin advertising to drum up sales, an expense it has until now avoided entirely.
Importantly, Tesla’s sales figures for the first three months of 2024 show it leapfrogged BYD, reclaiming its title as the world’s largest EV seller that it lost over the Christmas period. BYD sold 300,114 battery-powered vehicles during the first three months of 2024, it said on Monday, below Tesla’s output.
Yet after years in pole position, Tesla faces a bumpy road ahead.
