Tesla is now facing a new round of challenges. Its product line is aging. The first wave of new Cybertrucks was fraught with quality issues. Sales are stagnant. There is turmoil at the top of the hierarchy. The stock price has fallen. CEO Elon Musk's recent commitment to a low-cost Model 2 also doesn't seem to have clear information.
The product line is aging, and the new product Cybertruck has become a niche consumer
The first deliveries of the Tesla Cybertruck were completed at the end of November 2023. At the moment, Tesla has not announced the specific production volume. Documents filed with regulators last week said that since deliveries began in late November, the Cybertruck has not sold much at less than 4,000 units. Tesla previously disclosed in its financial report that the current annual production capacity of Cybertruck pickup trucks at the Gigafactory in Texas is less than 125,000 units. Tesla said it expects the Cybertruck to ramp up production for a longer period than other models, given the complexity of its manufacturing. But the reality is that the special styling makes the sales of this car look sluggish, and in some countries and regions, it is still facing the problem of too long a market cycle, which has become a niche consumption.
In addition, Tesla has maintained a simple product line, and some models have not been updated iteratively for many years. Even with the update, there is still no movement in the appearance. In the era of rapidly developing new energy vehicles, especially in the market dominated by young people's consumption, this makes customers feel a little aesthetically fatigued.
Sales hit a bottleneck, and overall sales began to decline
According to the latest data from the China Passenger Car Association (CPCA), sales of Tesla electric vehicles made in China in April were 62,167 units, down 18% year-on-year, lagging the overall increase. According to official data, Tesla's global deliveries in the first quarter of this year fell 8.5% year-on-year to 386,800 vehicles, the first year-on-year decline in nearly four years, and lower than market expectations of about 430,000 vehicles.
According to the financial report, Tesla's revenue in the first quarter fell 9% year-on-year to $21.3 billion, lower than the market expectation of $22.3 billion, which is not only the first year-on-year decline in nearly four years since the new crown epidemic disrupted operations in the second quarter of 2020, but also the largest decline since 2012, down more than 15% from $25.17 billion in the fourth quarter of last year.
When Tesla's Model Y all-electric crossover surpassed the Toyota Corolla to become the best-selling car in the world this year, the car set the standard for other automakers in the industry to emulate. But now, every top automaker seems to have its rival crossovers to challenge Tesla, and China's car-making prowess is even more relentless and all-encompassing. In the Chinese market, local companies have emerged to benchmark Tesla's best-selling models, the Model 3 and Model Y, which often have more beautiful interiors and exterior designs, while being slightly cheaper, which has also eaten into Tesla's sales.
The layoffs are fermenting, and there is turmoil in top management
Elon Musk shut down the unit responsible for Tesla's Supercharging business, fired two senior executives (Tesla later rehired a former Supercharger executive, its North American charging director, Max de Zegher), and laid off hundreds of employees, as the EV maker continued its restructuring amid a sharp decline in the EV market. After Musk announced last month that the automaker would cut "more than 10 percent" of its workforce (more than 14,000 jobs), there have been some changes at the top of the company to achieve a "lean, innovative and hungry" company atmosphere. In addition, according to LinkedIn, Renjie Zhu, director of manufacturing engineering at Tesla's Texas Gigafactory, announced his departure on Monday, ending his five-year career in Tesla's Texas and China. Such a move shows the talent strategy dilemma faced by the company due to business changes.
According to foreign media reports, Tesla mentioned in the layoff document submitted to California that it would lay off 223 employees in Palo Alto and Fremont, with the former laying off 223 employees and the latter laying off 378 employees, with a total of 601 employees in the two places. In the report, foreign media mentioned that Palo Alto is Tesla's main R&D and manufacturing base, designing and building power equipment, and playing the role of Tesla's engineering headquarters.
There is no definite information yet on the rumored low-cost new car
When it comes to the topic of automobiles, Musk did not mention Tesla's plans for new models, nor did he mention the specific meaning of "more affordable" cars mentioned in the earnings report. The affordable version of the Model 2 was first mentioned at Tesla's 2023 annual shareholder meeting, and Musk said in January that the car would be in production by the end of next year, but the expected spring product announcement was not released.
Tesla has now said it is "accelerating" plans, although, as with the Cybertruck, it's easy to mistake acceleration for braking, with Tesla often skipping tickets. The idea that the Model 2 could be produced at a new plant in Mexico or elsewhere has been replaced by a vague commitment to restructure existing infrastructure and production lines.
Significant price pressure has forced Tesla to launch affordable cars, whether it chooses to launch a car or not. Due to the general lack of demand for electric vehicles, especially Tesla, its quarterly auto revenue was down nearly 13% from last year and more than 19% from the previous quarter. And for the global market, in the new era of economic turmoil, affordable new cars can help increase the number of users who buy them.
Tesla needs to re-update or add products to gain market acceptance
Of Tesla's total quarterly sales of $21.3 billion, 82% is indeed "car revenue," with the rest being energy and services. Despite these numbers, Tesla is still conceptualized by some as an artificial intelligence and/or robotics company, so we may think that "it's not a car company." But if Tesla suffers a setback in the car business and doesn't gain a sufficient number of users, then many of its great ideas won't be able to unfold.
Therefore, for Tesla, it is necessary to increase or regain its confidence in automobiles. When the performance and stock price have fallen, Tesla must show that it can achieve positive growth again. It's not easy. They will have to lower prices and have to take proactive measures, "more models will have to be introduced, including cyber taxis, robo-taxis, etc., to pave the way for future development." At the same time, as the EV market matures, subsidies to help consumers buy EVs are limited in many parts of the world. This may be one of the reasons why the strong growth momentum of EV sales has slowed in recent years – and why the manufacturers themselves have had to lower prices, so it will be interesting to see if Tesla needs an affordable model.