The Decline of Tesla: Is Elon Musk Losing His Edge?

Tesla, once considered the pioneer of the electric vehicle industry, is now facing tough competition and a decline in sales. The company recently reported a significant drop in year-on-year sales, attributing it to a weak Chinese economy, factory disruptions in Germany, and supply constraints due to escalating conflicts in the Middle East.

However, according to CNN, Tesla’s woes cannot be solely blamed on external factors. One of the key reasons for the decline is the entrance of new competitors into the market, gradually eating into Tesla’s market share and sales.

Tesla has become an easy target by failing to introduce new products quickly enough to sustain customer interest. Additionally, CEO Elon Musk’s controversial statements and behavior have also turned off many potential customers.

While the overall electric vehicle market in the US has slowed down in recent months, the waning interest in electric vehicles seems to reflect a lack of interest in Tesla specifically. Other automakers such as Audi, BMW, Mercedes, and Rivian have reported over 50% growth in electric vehicle sales in the past year. Ford, too, announced an 86% increase in electric vehicle sales.

Stephanie Valdez Streaty, an analyst at Cox Automotive, noted that “the overall slowdown in electric vehicles seems to be reflecting a slowdown in Tesla.”

Tesla’s stock prices have plummeted nearly 1/3 since 2024 due to disappointing sales and profits, making it one of the worst-performing stocks in the S&P 500 this year.

Although Tesla’s sales increased by 38% compared to 2022, investors expected much more. Tesla warned in January that sales growth would be slower this year, but the first-quarter global sales drop of over 20% compared to the same period last year was worse than anticipated.

However, Tesla is not just a victim of the general decline in interest in electric vehicles. In the US, Tesla still holds a 56% market share of electric vehicle sales in 2023. Though this is lower than the 80% market share Tesla enjoyed in 2019, they still dominate the market. Therefore, if Americans are losing interest in Tesla, it could be indicative of a broader disinterest in electric vehicles.

According to recent reports from Cox Automotive, US electric vehicle sales increased by around 15% from Q1 2023 to Q1 2024. However, if Tesla is excluded, sales of other electric vehicles increased by 33%.

Tesla’s most popular models, the Model 3 and Model Y, are 7 and 5 years old, respectively. Other automakers, like Ford, Audi, and Hyundai, offer newer and more competitive electric vehicle models.

Valdez Streaty explained, “While Tesla’s core products are great, the auto industry revolves around ‘new’ models and newer alternative choices from competing rivals that may be slowing down Tesla’s demand.”

Tesla’s Cybertruck has garnered attention, but it has only recently been introduced and produced in limited quantities. Tesla is also releasing an updated version of the Model 3, but it remains fundamentally the same vehicle.

Chinese automakers like BYD pose a major threat globally, but they have not yet made significant inroads into the US market. Musk himself has referred to them as “the world’s most competitive automakers.”

Tesla’s CEO, Elon Musk, might also be causing trouble for the brand with his increasingly controversial statements in the public eye. In recent years, Musk has defended racial discrimination and made anti-Semitic remarks.

Data from Calibre, a reputation management firm in Denmark, revealed a sharp decline in Tesla’s reputation and customer consideration for buying their vehicles since early 2022 when Musk took over his initial social media platform, Twitter. Although the Calibre data does not establish a definite connection to specific causes, the research also discovered low evaluations of Musk himself. Søren Holm, Head of Customer Service at Calibre, noted that Musk and Tesla have a much closer connection in public perception than most CEOs and the companies they run.

Both Musk and Tesla have low scores in the “trust and like” category, according to Calibre’s analysis. The recent decline in “trust and like” scores for X, the former social media platform known as Twitter, indicates that both Musk and Tesla may need to address their diminishing public appeal.

Tesla’s reputation began to decline in 2022 when Musk publicly opposed Covid-19 restrictions, and it has continued to decline since then.

Holm explained that when competitive vehicles enter the market with comparable pricing, quality, and performance to what Tesla offers, the public image that Musk adds to the brand could disappoint potential buyers. He stated, “The reputation a CEO leaves on a brand and its perception carries significant weight.”

In conclusion, Tesla’s decline can be attributed to both internal and external factors. The entrance of new competitors offering compelling alternatives, combined with Elon Musk’s controversial behavior, has weakened Tesla’s position in the electric vehicle market. As the industry continues to evolve, it remains to be seen if Tesla can regain its position as the leader of the pack.

This article was originally published on Business Today.