Tesla appeared to be losing control of the market it essentially created after it reported a surprising drop in quarterly sales on Tuesday, raising fresh questions about Elon Musk’s leadership of the company.
The sales slump unnerved investors as rivals such as China’s BYD and South Korea’s Kia and Hyundai reported increases in electric vehicle sales, suggesting that slower overall demand for battery-powered models was not the only explanation for Tesla’s woes .
Tesla pioneered the electric vehicle market with the Model 3 sedan and Model Y sport utility vehicle, which proved that battery-powered cars could be attractive, practical and profitable. The cars revolutionized the automotive industry and forced established automakers to develop their own electric models.
But the market is evolving in ways that may not favor Tesla. Unlike the early adopters who fueled Tesla’s rise, mainstream buyers may be put off by the vehicles’ unconventional design, including minimalist interiors and a lack of buttons and switches. Almost all functions in Tesla vehicles are controlled by a large screen on the dashboard.
The system “is a distraction from adjusting almost anything inside the vehicle while you’re driving down the road,” Consumer Reports wrote in a review Tuesday of a new Model 3.
Tesla, which sells cars online and doesn’t have many showrooms, is often the target of complaints about poor service. This may give an advantage to established automakers such as Ford Motor and General Motors, which have extensive dealer networks and are ramping up production of electric vehicles.
Tesla seems to be at a loss to respond to these challenges. It has been slow to build on its initial success with new models, and Mr. Musk seems disengaged. He did not comment Tuesday on sales figures on X, the social media platform he owns and posts heavily. Instead, he lashed out at executives at the Walt Disney Company, whom he accuses of being “woke.” Such remarks have made him a hero to conservatives, but may push liberals, who are more likely to buy electric cars, away from Tesla.
Tesla said it delivered 387,000 cars worldwide in the first quarter, down 8.5 percent from 423,000 in the same period last year. This was the first time Tesla’s quarterly sales fell year-on-year since a modest decline at the start of the pandemic in 2020. The sales figures were also significantly lower than Wall Street analysts had expected for a modest increase.
“Tesla cannot stand still,” Ben Rose, president of Battle Road Research, said in an email. “Chinese electric vehicles are already established in Europe and it is not clear how long they will be banned from entering the US”
More affordable cars would help Tesla appeal to a wider range of buyers, Mr. Rose said.
To be sure, some of the sales decline may reflect production problems beyond the company’s control, including a fire at a Tesla factory near Berlin that was the result of an arson attack.
And the company’s cars still have many fans. In shifting the Model 3’s controls, Consumer Reports said the latest version provided a better ride than its predecessor and had improved handling.
But investors are clearly worried. Tesla shares have fallen more than 30 percent this year — including a 5 percent drop on Tuesday — amid concerns that the company has lost momentum.
In China, Tesla faces BYD and dozens of other rivals with ambitions to expand globally. In Europe, established automakers such as Volkswagen and BMW have introduced more exciting 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 rivals continued to report sales increases. BYD announced on Tuesday that it sold about 300,000 electric vehicles, up 13% from last year. The company also sold 324,000 plug-in hybrid vehicles in the first quarter, up 15%.
BYD and other Chinese automakers have been quick to introduce new models, often undercutting Tesla on price. These companies are also increasingly exporting cars to Europe, Southeast Asia and Latin America.
South Korea-based Kia said Tuesday that sales of its electric vehicles in the United States more than doubled in the first three months of the year compared with a year earlier, after it unveiled a new large sports 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, up 75 percent.
Toyota, the world’s largest automaker, doesn’t sell many fully electric vehicles. But the company said U.S. sales of electric vehicles, a category made up mostly of hybrids, under the Toyota and Lexus brands rose 74 percent in the first quarter.
Tesla pioneered mass-market electric cars, but its lineup is aging. The company’s only new model from 2020 is the Cybertruck, a futuristic pickup that was released in limited sales last year. The cheapest version Tesla says it can deliver this year starts at around $80,000, putting it out of reach for most car buyers.
Rivian, whose R1 pickup competes with the Cybertruck, said its sales, including 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 isn’t expected to hit the market in large numbers until 2026. In the meantime, Tesla remains dependent on the Model Y and Model 3 for most of its sales .
The company has repeatedly cut prices, but analysts say the strategy has eroded profits without doing enough to boost sales. The company has recently modestly increased the prices of some cars in the United States and China. The Model Y starts at nearly $45,000 before federal and state tax credits, following a $1,000 increase announced this week.
The quarterly sales numbers show that Tesla managers “need a real sales strategy and can’t just rely on the price cut,” Gary Black, managing director of investment firm Future Fund, wrote in 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 of right-wing conspiracy theories have alienated many of the left-leaning customers most likely to buy electric cars.
Los Angeles resident Raphaelle Cassens gave up her leased Tesla Model Y last year and replaced it with a leased electric BMW i4. Mr. Musk was one reason he switched, he said.
“Honestly, I don’t like him as a person at all,” said Ms. Cassens, who is a registered Democrat but described herself as nonpartisan. He also said he received poor service from the company. “The company’s attitude certainly reflects on 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 decline in battery vehicle sales was the result of a sharp drop in sales of the Chevrolet Bolt, which GM will stop making at the end of 2023. Sales of other electric models that use GM’s newer battery technology rose but not enough to make up for the loss of the Bolt, which was one of the most affordable electric cars in the United States.
