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Tesla Faces First Sales Slump in a Decade Amid Global Market Shifts and Fierce Competition

AInvestSunday, Jan 5, 2025 7:00 pm ET
1min read

Recent reports indicate that Tesla, the world's most valuable automaker, has experienced a decline in sales for the first time in over a decade. In 2024, the company delivered a total of 178.9 million vehicles globally, which represents a decrease of 5.7 million from the previous year. This decline has sparked questions about the factors contributing to Tesla's first drop in sales since going public.

Despite China becoming a pivotal market for Tesla, the company still struggled globally. In 2024, Tesla recorded its highest-ever sales in China, delivering 657,000 vehicles. Notably, the Model Y achieved the number one spot across all categories and models in China, selling 480,000 units for the year. This was underpinned by a robust performance in December when Tesla sold 83,000 vehicles in a single month, with weekly deliveries surpassing 20,000.

However, despite Tesla's strong presence in China, challenges persist. One of the primary reasons for the overall decline is fierce competition in the Chinese market, where growth rates of local competitors outpace Tesla's. For example, while Tesla's year-on-year growth in China was 8.8%, domestic companies such as BYD saw an increase of 41.26% in the same market segment. Other local brands like Zeekr and NIO also reported significant sales growth.

Another factor affecting Tesla is its limited model lineup. Unlike competitors launching multiple iterations annually, Tesla continues to offer its Model 3 and Model Y without frequent updates or new model introductions. This lack of variety may prevent Tesla from reaching broader customer bases, especially in lower-priced segments below 200,000 yuan. Additionally, other regions have seen shifts away from electric vehicles due to changes in subsidy policies and competitive pricing from traditional automakers.

In Europe and the U.S., sales have been affected by decreasing subsidies and increasing consumer preference for traditional vehicles. In the United States, political shifts and energy policy changes, including the reduction of electric vehicle subsidies, pose challenges. Similarly, in Europe, Tesla faces intense competition from brands like Volkswagen, affecting its market position.

Tesla's dependence on the Chinese market has become evident. While the company has expanded its production capacity, including a major facility in Shanghai, the shifting global landscape requires strategic adaptation. CEO Elon Musk has cited plans to increase deliveries by introducing more affordable models by 2025, aiming for a 20%-30% growth rate. These new strategies are crucial for Tesla to maintain its position in the rapidly evolving automotive industry.

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