- For a while, the electric vehicle (EV) industry has been sensing a deceleration in its growth.
- Research indicates that while EV sales are still on the rise, the pace of growth is slowing down.
- Tesla, a major player in the EV market, has now confirmed this slowdown.
During Tesla’s recent earnings report, Elon Musk cautioned about an impending slowdown in sales growth. The company attempted to present it to investors as being “between two major growth waves.”
Despite Tesla achieving nearly 500,000 vehicle deliveries between September and December, with a 38% increase in deliveries for the entire year, reaching 1.81 million, the warnings about a growth slowdown were pronounced.
While production numbers and deliveries showed positive trends, revenue growth was slower, increasing by 3% to $25.2 billion after years of rapid expansion.
The outlook appears less optimistic due to weakening demand. In response, Tesla implemented an aggressive price-cutting strategy in 2023, slashing prices by more than 25% across various models, including the Model 3 and Model Y.
Investors reacted negatively to Tesla’s statements, leading to a more than 10% drop in share price on Thursday, resulting in a loss of over $50 billion in market value. Amid rising inflation and interest rates, attention has shifted to a more affordable mass-market EV from Tesla. However, the arrival of the “next-generation” sub-$25,000 vehicle is not expected until the second half of 2025, causing concerns among investors.
The growing competition from China’s BYD, a significant EV player backed by Warren Buffett, has further intensified the challenges. BYD, which surpassed Tesla in global EV sales, has focused on affordable models, posing a significant threat. Elon Musk acknowledged the competitive threat, stating that Chinese automakers could “pretty much demolish most other car companies in the world” without trade barriers.
Consequently, Tesla explicitly stated that sales growth would be “notably lower” this year, aligning itself with the broader slowdown in the developed world. While the US saw a record 1.2 million EV sales in 2023, reflecting a 40% YoY surge, the growth rate slowed in the last quarter compared to previous periods.
Aran Waid, Senior Analyst at Benchmark Mineral Intelligence, highlighted that global EV sales growth has fallen short of automaker expectations. Factors such as high inflation, interest rates, and reduced financial incentives in Europe have impacted sales.
This slowdown phenomenon is not limited to Tesla, affecting both pure-play EV companies and traditional automakers. Ford announced production cuts for its F-150 Lightning truck due to poor sales, while General Motors adjusted its target amid slowing growth.
Despite these challenges, Tesla maintains some advantages. The ability to continue cutting prices, thanks to manufacturing cost savings, and potential market expansions, such as in Japan, provide opportunities for future growth. However, challenges persist, and Tesla acknowledges the need for engineers to meet the demands of mass-market vehicle production scheduled for the next year. As Elon Musk stated, “We really need the engineers to be living on the line.”
