Tesla is in trouble: its product line is aging. Sales are stagnating. Top executives are fleeing. The share price has fallen. The first wave of new Cybertrucks is plagued with quality problems. The low-cost Model 2 recently promised by CEO Elon Musk appears to be dead.
Some of Tesla's most environmentally conscious buyers are showing their displeasure with Musk's behavior by turning to other brands, even as one price cut follows another. Those cheap deals are squeezing profit margins, though the company remains profitable and still sells more electric vehicles than other automakers.
The company's four auto factories have more auto manufacturing capacity than customers.
The situation is so serious that on Monday Musk announced that “more than 10%” of his global workforce would be laid off. How much more did Musk not say. Tesla did not respond to a request for comment for this article, but Musk said in an internal email explaining the layoffs that the company had to look at cost reductions and increased productivity.
If Tesla were the only electric car maker under pressure, that alone would send shivers down the spines of California policymakers, from Gov. Gavin Newsom onward, who in their quest to address climate change and air pollution have established mandates. strict rules that will prohibit sales of new cars. that run solely on fossil fuels by 2035.
But the path to electric vehicles has, at best, hit a rough patch, with little visibility into road conditions ahead. Electric vehicle sales continue to rise, but at a much slower pace than the peaks reached in 2022 and early 2023.
Ford, General Motors and other big automakers are backtracking on their electric vehicle ambitions, pouring more money into hybrid vehicles, cutting production and delaying the introduction of some electric vehicle models. Electric vehicle startups, including Rivian, Lucid and Polestar, are laying off workers because they encounter production problems or don't meet their sales goals, or both. The financial difficulties of Fisker, the Manhattan Beach electric vehicle startup, have become so severe and its stock price so affected that it will be delisted from the New York Stock Exchange on April 22 or, more formally, be “ removed from the list.”
The big question is whether current conditions will prove to be increasing difficulties (however agonizing) on the path to a cleaner transportation economy. And if so, how long will the pain last?
Right now, EV sales growth is slowing at a time when rapid expansion is needed to meet climate goals. Across the U.S., EV sales rose just 2.6% year over year during the first quarter of 2024, while the market share of EVs versus gasoline cars declined to 7.3%, from the record 7.6% of 2023, according to Kelley Blue Book.
Even EV-friendly California is running into customer resistance: In 2023, EV's market share for new car sales surpassed 21%, far more than any other state. While first-quarter 2024 electric vehicle sales figures in California won't be available until early May, the signs are worrying: In the last half of 2023, new electric vehicle sales declined in California, the first negative growth never reported.
“We have reached a threshold of market intolerance,” said Karl Brauer, auto industry analyst at iSeeCars.com. “The number of people who have a vested interest or tolerance for addressing the challenges of electric vehicles, or who have the means and lifestyle to work with an electric vehicle,” appears to be hitting a wall, he said.
Temporary or long term? It's still to be determined, she said.
His firm analyzed electric vehicle penetration rates in states and cities and found that sales grew rapidly until market share reached about 8%, and then slowed dramatically or nearly stabilized. California is an exception; The market share of new electric vehicles reached more than 21% in 2023. Still, in the last quarter of the year, electric vehicle sales growth was negative, and Tesla's new car sales fell 10%.
The current problem for EV advocates: how to translate the customer profile from early adopters to mainstream buyers.
More than 90% of electric vehicle buyers, Brauer's research shows, are relatively wealthy homeowners who have installed their own chargers and own two or more vehicles, meaning that, in most cases, there are a gasoline car available for long trips.
Most car buyers are not as well-off, so the price difference between gasoline and electric cars (about $45,000 on average for gasoline, compared to about $55,000 for electric ones) is a big problem. (Even that $45,000 is high for millions of buyers, hence the strength of the used car market.)
EV drivers who live in condos or apartments must rely mostly on public or workplace chargers.
Public charging infrastructure is notoriously unreliable, outside of Tesla's charging network, a system the company could afford to build and maintain while maintaining a stratospheric stock price, a stock price that has suffered greatly over the last year. , falling almost 40% in the last six. months.
Tesla is beginning to open its charging network to other automakers, in part to qualify for federal subsidies.
While electric vehicle sales growth is slowing, hybrid cars are taking off, benefiting companies like Toyota and Honda.
Tesla news is resonating in the automotive world. For more than a decade, was the electric vehicle industry. Regulators pointed to Tesla as evidence that customers would buy electric cars if the industry made desirable vehicles instead of the glorified golf carts they were producing, feeble attempts to comply with government regulations. Under pressure from California and 12 other allied states, regulators in Europe and a burgeoning electric vehicle industry in China, automakers around the world are now investing hundreds of billions in electric vehicles.
If California and the world are to meet their lofty climate goals, policymakers and automakers, including Tesla, still have a lot of work to do.
