Phelan M. Ebenhack via AP
On its current track, Tesla will be an also-ran in the global EV market within a decade.
The vast majority of Elon Musk’s wealth consists of his large stake in the EV manufacturer Tesla. When Tesla’s stock price nearly doubled following the election, his wealth, at least on paper, soared to over $400 billion.
But that spike plainly has nothing to do with Tesla’s business fundamentals, which are increasingly shaky—and its future prospects are even worse. The company’s best-selling models are extremely old by auto market standards, other automakers are putting up stiff competition—Chinese ones in particular are poised to massacre Tesla in the developing world—its only new model in half a decade is a flop, and Musk’s right-wing antics are poisoning its sleek, environmentalist brand.
Absent more assistance from the incoming Trump administration, on its current track Tesla will be an also-ran in the global EV market within a decade.
The Financial Times reports that after years of very fast growth, in 2024 Tesla’s sales fell slightly for the first time since 2011. It is still the largest EV seller in the world, but only by a tiny margin—China’s BYD, which saw a huge increase year on year, sold 1.76 million EVs, against Tesla’s 1.79 million.
At first blush, this is quite curious. Practically every country on Earth has set up some kind of green transition program, and this typically includes some kind of EV incentive. Why isn’t the biggest EV seller reaping the benefit?
The first reason is an aging model lineup. The minority of Tesla investors who are not starry-eyed Elon Musk fanboys have been complaining for years that the company isn’t putting out enough new models. Every other car company has settled on a strategy of addressing as many market niches as possible—Toyota, for instance, currently lists 55 different models for sale in the U.S. (depending on how you count), and each has a half dozen or so trim levels. This is how they sell about 11 million cars a year. Tesla, by contrast, until recently had just four: one SUV and sedan in the mid-market, and one SUV and sedan in the luxury market.
Now, Tesla does have a new model in the form of the Cybertruck, which many thought would be a mega-seller because Americans love pickup trucks so much. But this has not happened. Fred Lambert at Electrek calculates: “Based on how Model S and Model X sales have been tracking, we estimate that Tesla delivered between 9,000 and 12,000 Cybertrucks in Q4, which is likely less than in Q3 despite launching the cheaper non-Foundation Series models and opening orders beyond those with reservations.” Those are pitiful numbers.
It could be that American truck buyers in particular are suspicious of EVs. Ford has sold about as many F-150 Lightning models as Tesla has Cybertrucks, but about 20 to 30 times as many gas-powered F-150s. Or it could be the Cybertruck is too weird-looking and niche to have mass appeal. Or perhaps it costs too much and its features are (as usual) not nearly as good as Musk promised. Or perhaps it is harmed by its reputation for breaking down or catching on fire. Whatever the case, the Cybertruck (which can’t be sold in Europe because it is so heavy and dangerous to pedestrians, incidentally) was a huge waste of resources that could have been spent developing models for other underserved niches—above all the minivan segment, which still has no EV options from anyone yet.
The second reason for Tesla’s floundering is competition. The Big Three American automakers all have EV divisions now, and while Ford is struggling due to poor planning, GM has ironed out the kinks with its Ultium platform, has a decent variety of models, and is well on the road to profitability. What’s more, Hyundai/Kia has developed a line of fantastic models with the best driver interface in the business, combining lots of fancy whiz-bang screen technology with dedicated controls for key functions like wipers, climate control, and so on. (I own a Kona EV, for the record.) Honda’s new Prologue has even come on of late.
Even as customers have soured on Tesla’s screen-first design, as it is both annoying and dangerous to look down while driving and fiddle with touch-screen menus instead of pressing a button by feel, the company has doubled down on removing traditional controls by getting rid of turn signal stalks in its new models. (That ought to be illegal, but I digress.)
In the developing world, BYD and other Chinese automakers are eating everyone’s lunch, including Tesla. Even Japanese manufacturers have been caught flat-footed and are bleeding market share. China is still Tesla’s biggest single market, and I expect sales there to fall precipitously next year—if for no other reason than the Communist government obviously prefers domestic companies over foreign ones.
The third reason is Elon Musk himself. It is now very clear that any Tesla purchase is directly supporting right-wing extremism around the world—and specifically groups that are attempting to slow the green transition. Trump, obviously, has promised to repeal the Inflation Reduction Act, and has particular animus against its EV credit. But Musk has also recently spoken out in favor of the AfD party in Germany and the Reform party in the U.K., both of which have attempted to slow or reverse their nations’ climate policies.
For years, Musk marketed Tesla as taking bold steps to fight climate change by cutting transportation emissions. Now he, through his Tesla wealth, is trying to stop those efforts across the board, even for cars. Half the point of owning an EV, which can be inconvenient and annoying at times, is to do one’s part to help cut emissions. Buying one from a guy who is a clear and present danger to the climate makes no sense, and customers have better options today anyhow.
Tesla’s best hope, as I see it, is to leverage Musk’s connections to Trump to extract subsidies from the government, or harm his competitors. That’s obviously where he’s starting by backing the cancellation of the EV rebate, which will put competitors with less mature supply chains in a weaker position than Tesla in the U.S. But more could be done. Maybe the post office could be forced to buy a million Cybertrucks. Maybe the carbon credit program, which has accounted for a large share of Tesla’s profits in the past, could be dialed up. Maybe the Boring Company can get a contract to dig a tunnel between the White House and Mar-a-Lago to be filled with Teslas driving 35 miles per hour.
The possibilities are endless. Then again, it may be quite hard to get any legislation through this House Republican caucus.
At any rate, Tesla’s preposterous meme stock-esque valuation may stay high for a long time. As we’ve seen with GameStop, markets can stay irrational so long as there is a supply of suckers willing to throw their money down the toilet. But in terms of business fundamentals, Tesla may have already peaked.
