Tesla Sees First Ever Drop in Annual Vehicles Sales
After years of strong double-digit, sometimes even triple-digit growth, Tesla suffered its first annual sales decline in 2024. After delivering 1.81 million vehicles to customers in 2023, the long-time global EV leader shipped 1.79 million cars last year. While that is an admittedly small decline of just 1.1 percent and Tesla shipped more cars than ever before in the fourth quarter, the drop from 38 percent growth in 2023 to a 1 percent decline is significant and might worry some shareholders, especially considering that Tesla is valued like a growth company, with a price-to-earnings ratio that can only be justified by strong future growth.
The year-over-year decline in deliveries can be attributed to a weak start of the year, when deliveries fell 9 and 5 percent in the first and second quarter of 2024, respectively. Back in April, the company blamed the production ramp of the updated Model 3 at its Fremont factory as well as factory shutdowns resulting from Red Sea shipping diversions and an arson attack at Gigafactory Berlin for the slowdown in production and shipments, a slowdown that analyst Wedbush analyst Dan Ives called “an unmitigated disaster” at the time. Ives was considerably more measured in this response to the latest figures, calling Q4 deliveries “respectable” and expressing confidence that Tesla would return to 20 to 30 percent growth in 2025.
The market realities for Tesla have changed, though, as the company is no longer the undisputed leader in electric mobility. While the 100 percent tariff on Chinese EVs imposed by the outgoing Biden administration and the new tariffs imposed by the European Union could help Tesla defend its position against companies like BYD domestically and in Europe, the company is facing increasingly stiff competition from domestic players in China, the world’s largest automobile market and Tesla’s second most important market. Domestically, Tesla faces uncertainty about the new administration's plans for EV policy. During the campaign, president-elect Donald Trump repeatedly stated that he would roll back many of the policies implemented by the Biden administration, including a $7,500 tax credit for electric vehicles, which helped make Tesla's cars more affordable.
Moreover, some recent polls suggest that Elon Musk’s Twitter takeover and his role in the U.S. presidential campaign have made the Tesla CEO an increasingly polarizing figure and that his image is spilling over on brands associated with him, including Tesla first and foremost. In October 2024, a YouGov survey found that 40 percent of the more than 5,000 polled U.S. adults had an unfavorable view of Musk and 30 percent of respondents said that his endorsement of Trump would make it less likely for them to buy one of his products.
