DETROIT — Tesla recently reported a decline in annual sales for the first time in over a decade, a move that has impacted the company’s stock, which had previously surged due to optimism surrounding Elon Musk’s connection with the presidential administration.
While Tesla saw a 2.3% increase in global vehicle sales during the last quarter of 2024, attributed to attractive offers such as 0% financing, incremental free charging, and affordable leasing options, it wasn’t enough to compensate for the downturn experienced at the start of the previous year.
From October to December, Tesla managed to sell 495,570 vehicles, bringing total deliveries for the year to 1.79 million. This figure represents a 1.1% decline from the 2023 total of 1.81 million, reflecting a trend of diminishing demand for electric vehicles both in the U.S and globally.
This annual decrease in sales marks Tesla’s first drop since 2011, according to data from Global Data. Back in 2010, the company sold 1,306 vehicles, but that number slightly decreased to 1,129 in 2011.
The surge in sales during the last quarter did not come without a price. Analysts from FactSet anticipated that Tesla’s average sales price would slide to just over $41,000, marking the lowest price in four years.
This situation raises concerns ahead of Tesla’s fourth-quarter earnings report scheduled for January 29, contributing to a 6.1% decline in Tesla’s stock on Thursday.
Musk has been a significant contributor to Trump’s campaign, donating over $250 million and frequently attending functions at Trump’s Mar-a-Lago resort. Since the election, Tesla investors have seen the stock appreciate more than 50%, buoyed by hopes that the new administration will ease regulatory burdens on electric vehicles and align with Musk’s priorities.
In previous forecasts, Tesla had projected a 50% growth in sales annually; however, this goal has faced challenges due to an aging product lineup and escalating competition, particularly in markets like China, Europe, and the U.S. Many early adopters have already purchased electric vehicles, leaving more conventional buyers worried about aspects like range, costs, and the accessibility of charging stations for longer journeys.
Tesla’s delivery figures for the fourth quarter fell short of Wall Street’s expectations, with analysts estimating sales around 498,000.
A lackluster start to the year prompted unprecedented discounts from Tesla, thereby squeezing its renowned profit margins.
The rising competition from both established automobile giants and emerging brands is increasingly threatening Tesla’s previously strong market position.
Daniel Ives, a financial expert from Wedbush, believes the stock’s value should hinge more on its potential to revolutionize self-driving technologies and AI advancements. Ives maintains that Tesla remains a worthy investment despite the recent sales decline.
“We have never viewed Tesla simply as a car company … instead we have always viewed Musk and Tesla as a leading disruptive technology global player,” Ives stated, reflecting on the broader vision of the company.
Although Tesla’s fourth-quarter sales set a record, they also highlight how the company’s aging vehicle models are getting close to saturation in the luxury entry-level market, noted Seth Goldstein, an analyst from Morningstar.
Except for the recently introduced Cybertruck, which has garnered limited interest, Tesla’s most recent consumer model is the Y small SUV, launched back in 2020.
To achieve its target of 20% to 30% annual sales growth this year, Tesla will likely need to roll out a vehicle priced around the mid-$30,000s to attract buyers who may be considering gas, electric, or hybrid alternatives, according to Goldstein.
He suggests Tesla could develop a new version of the Model Y that would compete in that price segment, albeit with a more compact interior and fewer features.
“Such a move would align Tesla more closely with conventional brands like Honda, Ford, and GM,” Goldstein added, indicating a shift away from the luxury sector to a more accessible vehicle range.
Jeff Schuster, who oversees automotive research at Global Data, emphasized Tesla’s growing competition not just domestically but also on a global scale as other EV manufacturers target mainstream consumers. “For continued growth, Tesla needs to diversify its offerings in size and pricing,” he explained.
Musk’s political affiliations may also alienate certain environmentally conscious consumers who traditionally align with Democratic values, Schuster noted. A broader and more economically viable lineup would better engage a wider audience.
Experts in the industry point out that Tesla, once the sole player with credible electric vehicle offerings, now faces formidable rivals like China’s BYD, which has significantly expanded its market presence.
Currently, there are 75 electric vehicle models available in the U.S. market. Although electric vehicle sales saw a slowdown in growth during the first nine months of the previous year, they are still increasing overall.
From January to September of last year, around 936,000 EVs were sold in the U.S., reflecting a 7.2% rise, a stark contrast to the whopping 47% growth seen in 2023. Despite this, sales are projected to outpace the prior year’s record of 1.19 million. As other manufacturers release their full-year sales data, the results will be available shortly.
During the last quarter of the year, nearly all of Tesla’s sales stemmed from the more affordable Model 3 and Model Y, with only 23,640 units of its premium models—including the Model X and Model S—as well as the recently launched Cybertruck sold.
Tesla outperformed BYD in terms of global electric vehicle sales, with BYD reporting a significant 41% increase for the past year, amounting to 1.77 million EVs sold. Both companies are contending for the title of the world’s leading electric vehicle producer.
Additionally, production during the fourth quarter totaled 459,445 vehicles, which was less than the deliveries in the same period, and the overall production for the year reached 1.77 million, falling short of total sales for that year.
