Last quarter, Tesla experienced its first annual sales decline since the pandemic, attributing the decrease to various factors such as a weak Chinese economy, an arson incident at its German factory, and supply constraints due to conflicts in the Middle East. However, Tesla’s issues extend beyond external factors as new competitors have entered the market and started to divert sales away from the company. Additionally, Tesla failed to introduce new products quickly enough to maintain customer interest, and its CEO, Elon Musk, has become a controversial figure that some don’t want to associate with, even for a good car.
In contrast to Tesla’s overall decline in sales, some automakers like Audi, BMW, Mercedes, Rivian, and Ford are reporting significant growth in electric vehicle sales, with Ford’s EV sales increasing by 86%. Analysts suggest that the slowdown in EV interest is primarily a Tesla slowdown, as the company’s stock price has dropped by nearly a third in 2024, making it one of the worst performers in the S&P 500. Despite Tesla still holding a majority share of electric vehicle sales in the United States, its market share has decreased from around 80% in 2019 to 56% in 2023, leading to the perception of an overall lack of interest in electric vehicles.
One of the key factors affecting Tesla’s sales is the age of its most popular models, the Model 3 and Y, which are seven and five years old, respectively. Competing automakers like Ford, Audi, and Hyundai offer newer EV models that are attracting customers away from Tesla. The company’s latest model, the Cybertruck, has generated attention but is produced and sold in low numbers. Chinese automakers like BYD are also emerging as global competitors, although they are not yet competing in the US market. Musk himself has acknowledged the competitive threat posed by Chinese car companies, referring to them as the most competitive in the world.
Elon Musk’s controversial public statements and actions have contributed to brand issues for Tesla, with his defense of racist tirades and agreement with anti-Semitic statements creating negative publicity. Data from Caliber, a reputation management firm, suggests that Tesla’s reputation and customer purchase consideration have declined since Musk’s takeover of the social media platform originally known as Twitter. The close association between Musk and Tesla in public perception has led to low trust and likeability scores for both the CEO and the company, potentially impacting consumer attitudes towards the brand.
As competing EV models offer similar price, quality, and performance to those of Tesla, the negative public image associated with Musk may deter potential customers. Musk’s reputation as a controversial figure could overshadow the positive aspects of Tesla’s products and dissuade shoppers from making a purchase. With the EV market becoming increasingly competitive, the impact of Musk’s statements and behavior on Tesla’s brand reputation and sales performance is a significant concern for the company’s future success.
