Are the wheels off for Tesla? – BBC news

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

In just over a decade, the company grew from a tech start-up to a mass-market automaker, investing billions in its clean energy business and seeing its value skyrocket.

But now the company is struggling with declining car sales and stiff competition from Chinese brands, as well as problems with the much-hyped Cybertruck.

Lower sales have hit revenues and hurt profits. The share price has fallen by more than a quarter since the start of the year.

Is this all just a bump in the road, or are the wheels coming off the Tesla wagon?

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

“The world is living under the illusion that electric cars cannot be as good as petrol cars,” he said.

Musk was speaking at the launch of the new Tesla Model S, a car he insisted would shatter that illusion. It was not an empty promise.

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

Although new models such as the Nissan Leaf began to develop a niche following, they had not yet made a major impact on the broader market.

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

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

It now has huge, so-called gigafactories building cars in Shanghai and Berlin, in addition to its original factory in Fremont, California, and a number of other US locations. Last year the company delivered 1.8 million cars, indicating it has firmly established itself as a mass-market manufacturer.

But according to Professor Peter Wells, director of Cardiff University’s Center for Automotive Industry Research, that is part of the problem. “When Tesla first came along, it had an exciting new product, a charismatic CEO, and it seemed really groundbreaking,” he explains.

Now, however, the company is “no longer the entrepreneurial newcomer and disruptor of new start-ups, but increasingly an industry that faces all the challenges this brings when faced with a growing number of competitors in the same market space.”

Other companies, such as China’s Nio, offer more exciting products, says Prof. Wells, while fellow Chinese company BYD offers good performance at lower prices. “Basically the world has caught up with Tesla,” he says.

There is no doubt that there is a lot more competition than there used to be. After the diesel emissions scandal that engulfed Volkswagen in 2015, Volkswagen started pouring money into electric vehicles.

And as governments around the world began to look seriously at a possible ban on the sale of new petrol and diesel models, other established manufacturers soon followed suit. Customers looking for an electric car with decent range and performance now have plenty of choice.

In China, meanwhile, policymakers have for years seen the development of electric vehicles (EVs) as an opportunity to capture a significant share of the global market and further their development. The result is the rapid growth of brands like BYD, which overtook Tesla late last year to become the world’s largest electric car manufacturer.

At the same time, as the EV market has become more established, subsidies to help consumers buy them have been reined in in many parts of the world. That may be one reason why the rampant growth in EV sales has slowed in recent years. and why manufacturers themselves have to lower their prices.

According to independent car analyst Matthias Schmidt, this has certainly had an impact on Tesla.

“Finance ministers who were previously happy to offer attractive incentives for purchasing a battery-electric car in a market environment that seemed virtually empty, with essentially a Tesla or a Tesla on offer, are now closing their wallets,” he says.

One market where this appears to have had a profound effect is Germany. A subsidy scheme that offered thousands of euros in discounts on the cost of a new electric car was abruptly ended in December.

Electric vehicle sales there fell sharply in the first three months of this year, with Tesla experiencing a 36% decline compared to the same period in 2023.

The question now is whether Tesla can regain the lost momentum. Its maverick CEO, Elon Musk, seems to be pinning his hopes on the company becoming a leader in vehicle autonomy – a provider of self-driving robot taxis.

Last month he wrote on his social media site

Yet Musk has been talking about the prospect of full autonomy for a long time. For example, in 2019 he promised that within a year there would be a million Teslas on the road that could function as robotaxis.

The reality so far is quite different. Tesla’s “Full Self Driving” package remains a lot less than the title suggests – it’s still a “hands-on” system that requires the driver to pay attention at all times.

The quest for full autonomy fits Tesla’s identity as a technology company, and not as a traditional car manufacturer. But Musk’s critics believe it’s just a smokescreen to distract from other issues.

Meanwhile, Tesla has slashed prices to boost sales, cutting costs and cutting workforces to improve margins. Just like any other car company would do.