Have the wheels come off for Tesla?

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

In just over a decade, the company has gone from tech newcomer to mainstream automaker, invested billions in its clean energy business and seen its value soar.

But today the company is grappling with declining car sales and intense competition from Chinese brands, as well as problems with its high-profile Cybertruck.

The decline in sales affected its revenue and profits. Its share price has fallen by more than a quarter since the start of the year.

So, is this all just a bump in the road, or are the wheels moving away from the Tesla train?

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

“The world has been under the illusion that electric cars cannot perform as well as gasoline cars,” he said.

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

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

Although new models such as the Nissan Leaf were beginning to develop a niche, they had yet to make a big impact on the broader market.

The Model S was powerful, had the performance of a sports car, 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-spec 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 factories, called gigafactories, that make cars in Shanghai and Berlin, in addition to its original facilities in Fremont, California, and a number of other U.S. locations. Last year it delivered 1.8 million cars, suggesting it has firmly established itself as a mainstream manufacturer.

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

But now the company “is no longer an entrepreneurial new entrant and upstart disruptor, but increasingly an industry facing all the challenges that entails when facing a growing range of competitors in the same space Steps “.

Other companies, such as China’s Nio, offer more interesting products, Professor Wells says, while his 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 before. Following the diesel emissions scandal that engulfed it in 2015, Volkswagen began investing money in electric vehicles.

And as governments around the world began to seriously consider possible bans on the sale of new gasoline and diesel models, other established manufacturers quickly followed. Customers looking for an electric car with decent range and performance now have plenty of options to choose from.

In China, policymakers have for years viewed the development of electric vehicles (EVs) as an opportunity to capture a significant share of the global market and have encouraged their development. The result has been the rapid growth of brands such as BYD, which overtook Tesla to become the world’s largest electric car maker late last year.

At the same time, as the market for electric vehicles has become established, in many parts of the world, subsidies to help consumers buy them have been limited. This may be one reason why the breakneck growth in electric vehicle sales has slowed in recent years. and why manufacturers themselves need to lower their prices.

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

“Finance ministers who were previously happy to offer attractive incentives for the purchase of a battery electric vehicle in a market environment that seemed empty, with essentially a Tesla or a Tesla on offer, are now closing their purses,” he said.

One market where this appears to have had a profound effect is Germany. A subsidy program offering thousands of euros off the price of a new electric vehicle was abruptly ended in December.

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

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

Last month, on his social media site Everything else is like variations on a carriage.”

However, Musk has been raising the prospect of total autonomy for a very long time. In 2019, for example, he promised that within a year, there would be a million Teslas on the roads, capable of acting as robot taxis.

The reality, so far, is rather different. Tesla’s “Full Self Driving” package remains a little less than its title suggests: it’s still a “hands-on” system that requires the driver to be attentive at all times.

The quest for full autonomy fits Tesla’s identity as a technology company rather than a traditional automaker. But Musk’s critics say it’s simply a smokescreen meant to distract from other issues.

Meanwhile, Tesla has cut prices to boost sales, and reduced costs and staffing to improve margins. Just like any other automaker could do.