Tesla is getting shellacked. Toasted. Wrecked. Destroyed. Choose whatever synonym suits you, the result is the same: The company’s European business is collapsing.
That is not an exaggeration. Sales fell a whopping 49% last month in Europe, according to data from the European Automobile Manufacturers’ Association (ACEA). Don’t blame an EV slowdown, either, as purely electric cars are on a bit of a tear in Europe. Sales increased 27.8% in April, to 184,685 units across the European Union (EU), European Free Trade Agreement (EFTA) countries and the United Kingdom.
The Model Y was the best-selling vehicle in the world last year. You’d expect a redesigned, improved model to generate a crazy sales blitz. Instead, sales are cratering.
Photo by: Andrei Nedelea
EVs accounted for 15.3% of the new vehicles registered in those markets, a new high-water mark for an April report. It’s a good reminder that, as the U.S. waffles back and forth on EV policy, many other markets are charging ahead.
Now, they’re doing so with less reliance on Tesla. Elon Musk’s company used to be the biggest name in EV sales, but increased competition and the boss’s political meddling have proven to be a toxic combination. Tesla is still the EV sales leader in the U.S., but it’s also struggling here. Buyers in Europe have been quick to abandon the brand, too, while Chinese buyers are ditching Teslas for home-grown brands.
It’s not clear if Tesla has a solution to this problem. While the company pinned its hopes on the refreshed Model Y, that strategy clearly didn’t work. First, Musk tried to blame the sales slump on factory downtime during the transition from building old Model Ys to new ones. Now that inventory levels are up and the factories have been running normally for some time, that excuse isn’t holding water, so it looks like the new Model Y hasn’t moved the needle.
That means any growth we see from Tesla is going to have to come from either price cuts or new models. The company has already cut its prices repeatedly in recent years, leaving it less room to move down. Plus, with U.S. tax credits on the chopping block, Tesla’s products are already about to get $7,500 more expensive in its home market. Just mitigating that change will chew into Tesla’s margins, and that’s before you account for the increased production costs thanks to new tariffs on auto parts.
New products seem like a better way out, but I’m skeptical they can fundamentally reset the trend here. Elon Musk has repeatedly said that Tesla’s value is in AI, not in car-making, and his relentless focus on full self-driving has taken up most of the company’s resources. Its products are old—the Model S debuted in 2012 and the Model 3 in 2017, and while both have received refreshes, they are no longer world-beating EVs. Its lone truly new product, the Cybertruck, is a flop. And its next three products seem to be a moderately updated Model Y, a Cybercab with only two seats and, eventually, large-scale production of the Semi.
The gamble, it seems, is that true self-driving technology will reset the value proposition of these vehicles. An even less luxurious, more drab Model Y strikes me as an unappealing offering. But if you can deliver a self-driving car that fits plenty of passengers and cargo and can go 300 miles on a charge for like, $35,000, I can see it working.
The problem is that being a self-driving car company requires one thing above all: Trust. Consumers need to trust that companies offering autonomous driving products have fully validated the safety of the technology. After years of using the public as beta testers, then a year of live-tweeting the destruction of all regulatory bodies, I just don’t know if Elon Musk can still inspire that trust among buyers.
Still, it may be the only option he has left. As the European sales collapse shows, this is not the time to keep calm and carry on. Tesla has become a toxic brand in many corners of the world, and its products are less exciting than they used to be.
The company needs a reset, but it may not be getting one soon.
Contact the author: Mack.Hogan@insideevs.com.
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