Tesla Inc. reported a sharp 13 percent decline in its first-quarter global sales, marking the automaker’s weakest performance in nearly three years and falling significantly short of market expectations. The disappointing results fueled investor concerns, sending shares down approximately 6 percent in early trading Wednesday. The slump is being attributed to a confluence of factors, including a growing consumer backlash against CEO Elon Musk’s political activities, intensifying competition from rival electric vehicle makers, and potential buyers holding off purchases in anticipation of refreshed models.
The electric vehicle pioneer delivered 336,681 vehicles worldwide during the January-March period. This figure represents a substantial drop from the 386,810 units delivered in the same quarter a year prior. Furthermore, it missed the consensus analyst estimate compiled by Visible Alpha, which had predicted deliveries of 372,410 vehicles.
“We are not going to look at these numbers with rose-colored glasses…they were a disaster on every metric,” stated Wedbush Securities analyst Dan Ives. “The Street and us knew a bad 1Q was coming but this was even worse than expected.”
A key factor cited for the downturn is the increasing public scrutiny and negative reaction to CEO Elon Musk’s political engagements. His advisory role to US President Donald Trump, associated with controversial policies like federal workforce reductions and cuts to humanitarian aid, along with his perceived embrace of far-right politics, has reportedly alienated some customers. Protests have increased at Tesla dealerships in the US and Europe, and reports suggest a rise in Tesla owners trading in their vehicles. Additionally, Tesla cars and facilities have increasingly become targets for vandalism globally.
Compounding these issues is the intensifying competitive landscape. While Tesla once dominated the EV market, established automakers like Volkswagen and BMW, along with aggressive Chinese rivals such as BYD, are capturing significant market share. Notably, research firm Counterpoint predicts China’s BYD is on track to surpass Tesla as the world’s top EV seller for the first time this year, projecting a 15.7% market share for BYD compared to Tesla’s 15.3%. Tesla’s sales figures reflected this pressure, showing slumps in key European markets like France and Sweden for the third consecutive month in March, even as overall EV adoption continued to grow in these regions.
Product cycle dynamics also appear to be impacting sales. Many consumers are reportedly waiting for updates to Tesla’s lineup, particularly the highly anticipated refresh of the Model Y, its top-selling vehicle. While Tesla began rolling out the refreshed Model Y with updated styling and interiors in China in late February and in the US and Europe last month, the anticipation likely suppressed demand in the earlier part of the quarter. Furthermore, while Tesla has indicated plans for a more affordable vehicle based on its current platform to launch this year, specific details remain scarce. The company’s expensive and uniquely designed Cybertruck, launched in late 2023, has faced limited demand due to its polarizing aesthetics and reported quality concerns, recently culminating in a recall of nearly all units.
“In the near term it is understandable to worry over declining margins and sales in the same moment impacting earnings growth and revenues,” commented Brian Mulberry, client portfolio manager at Tesla shareholder Zacks Investment Management.
External factors like trade policy also loom. While Tesla’s US manufacturing might mitigate some direct impact from new 25% tariffs on imported vehicles proposed under the Trump administration, Musk himself has acknowledged the cost implications are “significant.” The company also remains wary of potential retaliatory tariffs from other nations.
The confluence of political blowback, intensifying competition, and product cycle timing created a perfect storm for Tesla in the first quarter, resulting in its most challenging sales period since mid-2021 and raising significant questions about its near-term growth trajectory.
