For Tesla, have the wheels come off?
It used to seem as though Tesla could do no wrong.
It grew from being a tech start-up to a mass-market
automaker in little over ten years, investing billions in its clean energy
division and witnessing a sharp increase in value.
However, the business is currently having trouble with declining auto sales,
fierce competition from Chinese automakers, and issues with its much-discussed
Cybertruck.
Reduced sales have impacted the company's earnings and revenues. Since the
beginning of the year, the share price has decreased by over 25%.
It has lowered pricing in significant areas and is currently
letting go of 14,000 workers, or 10% of its total staff worldwide. Senior
executives and the entire team in charge of its highly regarded supercharger
network are among those impacted.
Is this only a hiccup in the road, or are people abandoning the Tesla train?
"It's about breaking a spell," Elon Musk clarified in June 2012 to a
group of people who had been invited especially to Tesla's California facility.
"The world has been under the illusion that electric cars
can't be as good as petrol cars," he stated.
Speaking at the introduction of the new Tesla Model S, which he vowed would
smash that illusion, was Elon Musk. It was not a meaningless assurance.
Electric automobiles at the time were known for being incredibly
slow, uninspired, unusable, and having a very short driving range.
While some new models, like the Nissan Leaf, were beginning to gain a devoted
following, they had not yet had much of an effect on the larger market.
The Model S was a powerful vehicle that could go up to 265 miles on a single
charge and featured sportscar performance. Although the lowest performing model
cost $57,000 (£47,000) in the US, it wasn't inexpensive, but it was definitely
worth it.
Four other models have been released by Tesla since then:
the Model X SUV, the "affordable" Model 3 and Model Y, and the
Cybertruck.
In addition to its original factory in Fremont, California, and many other US
sites, it now has massive, so-called gigafactories constructing automobiles in Shanghai
and Berlin. With 1.8 million cars delivered last year, it appears to have
solidified its position as a mass-market manufacturer.
However, that is part of the issue, according to Professor
Peter Wells, director of Cardiff University's Centre for Automotive Industry
Research. "When Tesla first emerged, it had an exciting new product, a
charismatic CEO, and it came across as really pioneering," he recalls.
Currently, the business "is no longer the entrepreneurial new entrant and
upstart disrupter, but increasingly an industry incumbent with all the
challenges this brings when faced with a growing array of competitors in the
same market space" .
Prof. Wells claims that while BYD, another Chinese company,
delivers good performance at lower prices, other businesses, like China's Nio,
are delivering more intriguing items. "Basically, the world has caught up
with Tesla," he states.
Without a question, the level of competitiveness has
increased significantly. After VW was rocked by the diesel emissions crisis in
2015, the company started investing heavily in electric cars.
And other well-known manufacturers soon followed, as governments all around the
world started to give serious consideration to outright prohibiting the sale of
new petrol and diesel models. Consumers now have a wide choice of options when
searching for an electric vehicle with respectable performance and range.
Conversely, Chinese leaders have long supported the development of EVs because they believe it will allow them to capture a sizable portion of the worldwide market. As a result, companies like BYD, which surpassed Tesla to become the world's largest producer of electric vehicles at the end of last year, have seen tremendous growth.
Simultaneously, as the electric vehicle (EV) market has
become stronger, subsidies that formerly enabled consumers to purchase EVs have
been reduced in numerous regions of the world. That could be one of the causes
of the recent slowdown in the EV market's explosive growth and the
manufacturers' need to lower their pricing.
Matthias Schmidt, an independent auto analyst, claims that Tesla has
undoubtedly been impacted by this.
"Finance ministers who were previously happy to offer
attractive incentives for the purchase of a battery electric vehicle in a
market environment that appeared bare-shelved, with essentially a Tesla or a
Tesla on offer, are now slamming their purses shut," according to him.
Germany is one market where this seems to have had a significant impact. A
December abrupt end was made to a subsidy programme that offered thousands of
euros off the cost of a new electric vehicle.
In the first three months of this year, EV sales plummeted
drastically, with Tesla experiencing a 36% decline in comparison to the same
period in 2023.
Currently, the question is whether Tesla can reclaim its lost ground. Elon
Musk, the company's unconventional CEO, seems to be banking on the business to
become a pioneer in autonomous vehicles and a supplier of driverless robot
taxis.
He posted the following last month on his social networking platform, X: "Going all in for autonomy is a glaringly obvious move, but it's not quite betting the company." All other things are only modifications of a horse-drawn vehicle.
However, Musk has long extolled the virtues of total
autonomy. For instance, in 2019 he declared that a million Tesla vehicles
equipped with robotaxis functionality would be on the road in just one year.
As of right now, the reality is somewhat different. Tesla's "Full Self
Driving" package is still very much a "hands on" technology that
necessitates constant attention from the driver, as the name suggests.
The pursuit of complete autonomy is consistent with Tesla's
positioning as a technology company as opposed to a conventional automaker.
However, some who oppose Musk think it's just a smokescreen to cover up other
issues.
In the meantime, Tesla has been lowering prices to increase sales and improving
its margins by lowering expenses and staffing levels. Much like any other
automaker might.