Tesla Sales Continue to Plummet — Is Demand for Electric Vehicles Going Down?
Written by
David Nadelle
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Tesla shares dropped another 5% on Monday, April 1, after the EV company’s first annual drop in sales was reported. Shares have suffered a loss of more than a third of their value this year. This has caused many to question Tesla’s control of the electric vehicle (EV) market and its boss’s leadership capabilities moving forward.
Although Tesla is using the recent arson attack at a Berlin Tesla factory, the diversion of ships due to attacks on container vessels in the Red Sea and the production ramp-up of its redesigned Model 3 to explain away share drops, the plunge is better attributed to increased competition rather than those factors, according to CNN.
Is Demand for Electric Cars Going Down?
It’s not just Tesla suffering from poor earnings — first quarter sales for EVs fell across the board. There is also increased competition as brands introduce models quicker than Tesla. Consumer demand is still there but the pace of EV growth has slowed, according to Reuters.
“Global EV momentum is stalling. The market is over-supplied vs demand,” said Morgan Stanley analyst Adam Jonas in a recent research note.
There are a few reasons why sales are slowing including the fact that a limited number of new models qualify for a federal EV tax credit. In addition, the lack of charging stations and an unreliable charging network have created a space where customers are unable to buy EVs even if they want one. Most importantly, however, remains the fact that EVs are still really, really expensive. According to Find My Electric, most estimates put the average price of a new EV somewhere around $50,798 while the average price of a new car of any kind in the U.S. is around $48,800.
Who’s Tesla Competing With?
According to CNN, Tesla outsold its main competition, China’s BYD, in the first quarter of 2024. Right now, BYD’s sales are up 13% year-over-year. Musk is facing stiff competition from rival U.S. brands too. The “legacy automakers” are running at full tilt to make more affordable models as the market slowly switches from internal combustion engine vehicles to EVs.
Toyota hasn’t posted earnings yet, but shows a 61% increase in their EV sales. GM took a hit after discontinuing the Chevy Bolt but looks to bounce back from their 22% first-quarter earnings drop quickly. The company has already seen an 841% jump in EV sales from the Cadillac Lyric, GMC Hummer SUV and pickup, and the Chevrolet Blazer and Silverado EVs.
Ford showed 42% sales growth for their hybrid models. The company plans to double production of the F-150 including hybrid and EV models.
“The new F-150 will be a big play for us across gas, hybrid and electric vehicle segments of our business,” Andrew Frick, president of the company’s internal combustion business, known as Ford Blue, said in a statement.
Hyundai broke records in March doubling sales for their EV lineup which includes the IONIQ 5, IONIQ 6 and Kona. The IONIQ 5 set a record of it’s own, with 3,361 models sold in March.
“Demand for our vehicles, especially EVs, remains high,” Randy Parker, Hyundai Motor America CEO, explained.
What’s Tesla’s Next Move?
Dan Ives, analyst with Wedbush Securities, said those expecting Tesla sales to surge during the first quarter of 2024 were disappointed. In 2024 Q1, Tesla produced over 433,000 vehicles but delivered only approximately 387,000 vehicles, per Tesla’s Investor Relations page.
“While we were anticipating a bad first quarter, this was an unmitigated disaster that is hard to explain away,” said Ives in a note to clients. “We view this as a seminal moment in the Tesla story for Musk to either turn this around and reverse the black eye first quarter performance. Otherwise, some darker days could clearly be ahead that could disrupt the long-term Tesla narrative.”
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