Have the wheels come off for Tesla?

  • Written by Theo Leggett
  • Business correspondent, BBC News

Image source, Getty Images

Comment on the photo, Last month, Tesla was forced to recall thousands of its Cybertrucks due to safety concerns around the accelerator pedals

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

In just over a decade, it has gone from a technology startup to a mass-market automaker, invested billions in its clean energy business, and seen its value skyrocket.

But the company is now suffering from declining car sales and intense competition from Chinese brands, as well as problems with the highly publicized Cybertruck.

The decline in sales has hurt its revenues and hurt its profits. Its share price has fallen by more than a quarter since the beginning of the year.

Is this all just a bump in the road, or are the wheels coming off the Tesla wagon?

“It's about breaking the spell,” Elon Musk explained to a specially invited audience at Tesla's California factory in June 2012.

He said: “The world was under the illusion that electric cars could not be as good as gasoline cars.”

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

Image source, Getty Images

Comment on the photo, Tesla's 2012 release of the Model S shook up the electric vehicle market

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

The Model S was powerful, had sports car performance, 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-performance version, but it certainly proved a point.

Since then, Tesla has launched four more models, including the Model

It now has so-called mega factories that make cars in Shanghai and Berlin, in addition to its original facility in Fremont, California, and a number of other American locations. Last year, it delivered 1.8 million vehicles, indicating that it has firmly established itself as a mass-market manufacturer.

But according to Professor Peter Wells, director of the Center for Automotive Industry Research at Cardiff University, this is part of the problem. “When Tesla debuted, it had an exciting new product, a charismatic CEO, and the company seemed really groundbreaking,” he explains.

However, the company “is now no longer an entrepreneurial newcomer and innovator, but increasingly an industry that bears all the challenges this brings when faced with an increasing range of competitors in the same market space.”

Professor Wells says other companies, such as China's Nio, offer more exciting products, while another Chinese company, BYD, performs well at lower prices. “Basically, the world has caught up with Tesla,” he says.

Image source, Getty Images

Comment on the photo, Chinese electric car brand Nio makes cars with the wow factor

While governments around the world began to seriously consider permanently banning the sale of new petrol and diesel models, other manufacturers quickly followed suit. Customers looking for an electric vehicle with decent range and performance now have plenty of options to choose from.

Meanwhile, in China, policymakers have for years viewed the development of electric vehicles as an opportunity to capture a significant share of the global market and promote their development. The result has been the rapid growth of brands like BYD — which overtook Tesla to become the world's largest electric vehicle maker at the end of last year.

At the same time, as the electric vehicle market becomes more established, subsidies to help consumers purchase them have been curbed in many parts of the world. This may be one reason why the explosive growth in electric car sales has slowed in recent years – and why manufacturers themselves are forced 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 to buy a battery electric car in a market environment that seemed bare of shelves, with a Tesla or a Tesla on offer, are now closing their wallets,” he says.

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

The question now is whether Tesla will be able to regain lost momentum. Its autonomous CEO, Elon Musk, appears to be pinning his hopes on the company becoming a leader in vehicle autonomy – a provider of driverless robotaxis.

Last month, he wrote on his social media site

Image source, Getty Images

Comment on the photo, Elon Musk is betting that Tesla is the leader in the field of self-driving cars

However, Musk has been talking about the possibility of full independence for a very long time. In 2019, for example, he promised that within a year there would be 1 million Teslas on the road capable of operating as robotaxis.

The reality, so far, is somewhat different. Tesla's “Full Self-Driving” package remains less than its title suggests — it's still a “hands-on” system that requires the driver to pay attention at all times.

The pursuit of full autonomy fits with Tesla's identity as a technology company, rather than a traditional automaker. But Musk's critics believe it is just a smokescreen to distract attention from other problems.

Meanwhile, Tesla has cut prices to boost sales, cut costs and reduced headcount to improve its margins. Just like any other car company would do.

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