Did the Tesla's wheels fall off?

There was a time when it seemed like Tesla could do no wrong.

In just over a decade, the company has grown from a technology startup to a mass-market automaker, invested billions of dollars in clean energy businesses, and seen its value skyrocket.

But the company is currently struggling with declining car sales, intense competition from Chinese brands, and problems with its much-publicized Cybertruck.

The decline in sales is hitting profits and putting pressure on profits. The company's stock price has fallen by more than a quarter since the beginning of the year.

So is all this just a coincidence or did we just miss the Tesla bandwagon?

“It's about breaking the spell,” Elon Musk explained to a specially invited audience at Tesla's California factory in June 2012.

“The world is under the illusion that electric cars can't be any better than gas-powered cars,” he said.

Speaking at the unveiling of the new Tesla Model S, Musk claimed the car shatters that illusion. It wasn't an empty promise.

At the time, electric cars had a longstanding reputation for being slow, uninspiring, impractical, and had very limited range.

New models such as the Nissan Leaf were beginning to gain a niche following, but had not yet made a significant impact on the broader market.

The Model S was powerful, had sports car-like performance, and could travel up to 265 miles on a single charge. It wasn't cheap, with the least powerful version starting at $57,000 (£47,000) in the US, but it certainly made sense.

Since then, Tesla has launched four more models, including the Model X SUV, the “affordable” Model 3 and Model Y, and the Cybertruck.

The company now has huge so-called Gigafactories that make cars in Shanghai and Berlin, in addition to its original facility in Fremont, Calif., and many other locations in the United States. Last year, the company delivered 1.8 million cars, indicating that it has established itself as a mass-market manufacturer.

But that's part of the problem, according to Professor Peter Wells, director of Cardiff University's Center for Automotive Industry Research. “When Tesla first came out, it seemed like a really pioneering company, with exciting new products and a charismatic CEO,” he explains.

But now the company is “no longer an entrepreneurial new entrant or start-up disruptor, but an established industry with all the challenges that come with facing an ever-increasing number of competitors in the same market space.” “It's coming.”

Professor Wells said other companies, such as China's Nio, offer more exciting products, and fellow Chinese company BYD offers better performance at lower prices. “Basically, the world has caught up with Tesla,” he says.

There is no doubt that competition is fiercer than before. Following the diesel emissions scandal that erupted in 2015, Volkswagen began pouring money into electric vehicles.

And as governments around the world began to seriously consider eventually banning the sale of new gasoline and diesel models, other established manufacturers quickly followed suit. Customers looking for an electric vehicle with sufficient range and performance have many options.

Meanwhile, policymakers in China have long promoted the development of electric vehicles (EVs), viewing it as an opportunity to capture a larger share of the global market. As a result, brands such as BYD have grown rapidly, overtaking Tesla as the world's largest electric car maker late last year.

At the same time, as the EV market becomes more established, subsidies for consumers to purchase EVs are being curtailed in many parts of the world. That may be one reason why the rapid growth in EV sales in recent years has slowed. And why do manufacturers themselves have to lower prices?

This is certainly having an impact on Tesla, according to independent auto analyst Matthias Schmidt.

“Treasury ministers were happy to offer attractive incentives for the purchase of battery electric vehicles in a market environment that had so far been essentially a shelved one where Teslas and Teslas were being sold. are now slamming their wallets shut,” he said.

One market where this seems to be having a big impact is Germany. A subsidy scheme that offered thousands of euros off the price of new electric cars abruptly ended in December.

EV sales in the region fell sharply in the first three months of this year, with Tesla suffering a 36% decline compared to the same period in 2023.

The question now is whether Tesla can regain its lost momentum. The company's maverick CEO Elon Musk seems hopeful that the company will become a leader in self-driving vehicles, a provider of driverless robot taxis.

Last month, he wrote on his social media site They're all variations on horse-drawn carriages.”

But Musk has been talking about the possibility of full autonomy for a very long time. For example, in 2019 he promised that within a year there would be 1 million Teslas on the roads, functioning as robotaxis.

So far, the reality is quite different. Tesla's “Full Self-Driving” package isn't as much as its title suggests, it's still a “hands-on” system that requires constant driver attention.

The pursuit of full self-driving fits into Tesla's identity as a technology business rather than a traditional automaker. But Musk's critics believe this is simply a smokescreen to distract from other issues.

Meanwhile, Tesla is lowering prices to boost sales and cutting costs and cutting jobs to improve profit margins. The same goes for other car companies.