Hit by a perfect storm of politics, model-year changeovers and competition, Tesla sales have declined dramatically to open 2025.
The electric vehicle maker’s sales dropped by 13% in the first quarter according to Cox Automotive, even as the overall electric vehicle segment grew by 11%. The sales swoon — coupled with a 34% drop in Tesla’s stock — was the largest Tesla sales drop since the second quarter of 2022, when sales were hobbled by COVID-related supply chain issues.
The decline dovetails with the production rollout of the second generation of its best-selling vehicle, the Model Y SUV. Model Y sales cratered by 34% as its four production plants undergo a manufacturing changeover. The Texas-based brand’s other volume model, the Model 3 sedan, holds promise for a Y rebound as the 3 went through a similar update a year ago and saw sales rebound in Q1 with 70% growth to 30,842 units.
The EV siblings were the third and twelfth best-selling non-pickup vehicles in the U.S. market last year — an impressive achievement for a brand that has only sold volume vehicles in the United States for less than two decades. Lower-volume models had mixed results, with the Cybertruck pickup up 129% in Q1 while the Model S sedan and Model X SUV declined by over 30%.
The Tesla stock rollercoaster is nothing new, said iSeeCars auto analyst Karl Brauer, who noted wild rides over the last 15 years. Tesla faced challenges from a federal rescue in 2010, Model 3 “production Hell” in 2018 and political blowback from CEO Elon Musk’s Twitter purchase in 2022.
But the slide in Tesla’s traditionally torrid sales growth, Brauer says, is a different phenomenon.
“This is a resilient brand. I always wonder if the current event is the one that takes out Tesla,” said the California-based industry veteran. “But there two big factors that didn’t exist before: 1) Aging product with EV sales plateauing, and 2) more competition coming for this niche electric space.”
EV market sales growth in Q1 was just a third of its 33% pace in 2023. Despite the quarterly numbers, Tesla remains by far the biggest player in the niche EV market with 44% market share — though that is off from 79% in 2020.
Q1 sales winners in the EV space included Chevrolet, which was up 114% year-over-year to 19,186 units sold, and Ford, which rose 12%. The Dearborn automaker was runner-up to Tesla (128,100 models sold in Q1) with 22,550 units sold.
“While Tesla still dominates sales, volume peaked in 2023 and market share has declined since 2020,” said Stephanie Valdez Streaty, Cox director of industry insights.
Ironically, the surge in competition has come at the same time that Tesla has opened its unparalleled Supercharger network to other brands, making it easier for customers to deal with range anxiety.
Also indicative of the slowdown in EV sales growth is the fall-off in used EVs’ residual value. An iSeeCars study released this week found that half of the Top 10 used cars with the biggest price drops are EVs, including (in order) the Model S, Porsche Taycan, Model Y, Model 3 and Hyundai Kona Electric.
Tesla has been intertwined with American politics since before the first Model S hit the road in 2012. With green activist Musk at the helm, the brand overtook the Toyota Prius as a moral status symbol with its affluent customer base receiving controversial government tax credits. A darling of Democratic politicians, the company scored a $465 million loan from President Barack Obama’s Department of Energy to stay afloat through the 2010 financial crisis.
But as Musk turned rightward, political blowback got more intense. Musk’s work for the Trump administration has put Tesla in the crosshairs again after his 2022 free-speech crusade that reinstated President Donald Trump on Twitter. Activists have targeted showrooms and vehicles with vandalism, and celebrity members of Tesla’s green California base have encouraged sales boycotts.
The intimidation campaign has undeniably had an effect, with some customers telling The Detroit News they are avoiding Tesla for fear of being targeted.
Tesla declined comment for this story.
The EV maker’s stock rose 3% Wednesday after a Q1 earnings call as Musk said he will spend more time with the company, which saw its profits drop 70% year over year. “Starting early next month, in May, my time allocation to DOGE will drop significantly,” the CEO told investors.
Tesla also announced its driverless robotaxi service will roll out in Austin, Texas, in June — joining Google’s Waymo operation in the autonomous transportation race.
In the retail market, analyst Brauer said new product is the best antidote for the company’s sales dip.
“Even if Model Y sales improve, it’s not going to shift momentum. Tesla needs a flood of new sales, and it has long promised a sub-$30,000 EV,” he said, referencing what Tesla internally calls the Model Q. “That would be a game changer.”
In the earnings call, Tesla told investors it intends to roll out a cheaper EV this June, though industry insiders expect that to be a sub-$40k version of the Model Y.
The Cybertruck was supposed to be a game changer when it was unveiled back in 2019. Musk hyped sales of 250,000 a year by 2025, but the pickup’s production has been tempered by high costs and manufacturing issues, and Q1 deliveries — despite the 129% YOY increase — were just 6,406.
Originally published in The Detroit News.
