Sales slump to job cuts: Warning signs grow for Tesla as electric vehicles surge

Tesla is in a troubled water. The largest electric car manufacturer in the world is going through a multipronged challenging situation. On one side, the EV manufacturer has announced a stunning sales slump in the first quarter of 2024, delivering 387,000 cars worldwide, down 8.5 per cent from the same period last year. On the other hand, it is planning to lay off 10 per cent of its global workforce in an attempt to streamline operations. In the meantime, almost immediately after the news of the job cut was reported, Tesla's stock went down 5.5 per cent on Monday, resulting in a more than 35 per cent drop in 2024.

Tesla has certainly played a revolutionary role in making electric cars mainstream worldwide. The electric car manufacturer is still the biggest EV manufacturer in the world, credited with almost single-handedly creating the global demand for electric vehicles. In fact, it was like as Tesla went, so went the industry. However, in a short period of time in the recent past, the global EV business is not just all about Tesla anymore.

Instead, carmakers from all the continents have been coming up with their respective EV lineup and registering growing ales for them as well. For example, Ford and BMW sold 20,223 units and 82,700 pure electric cars respectively, in the first quarter of 2024, between January and March this year, up sharply from the same quarter a year ago. In a nutshell, competition is growing rapidly squeezing Tesla's global market share.

In other words, Tesla is losing its edge over its competitors, especially the Chinese ones. In this gradually evolving situation, Tesla is facing a multipronged challenge. Here are some key reasons what's going wrong for Tesla.

No new car in years and super sluggish innovation

Despite being the first carmaker to prove that there is a market for electric vehicles and becoming the most valuable car company in the world, Tesla has been painstakingly slow in innovation. It has not introduced a single new car in years. Also, Elon Musk's overpromising and underdelivering nature with Tesla has impacted the automaker's image and brand value.

Despite creating maddening hype with the Tesla Cybertruck, the OEM was too sluggish in bringing the electric pickup truck into the market and the development process was marred with problems. The automaker recently cancelled plans for a low-cost model in the face of steeply rising competition, which further came a blow to the brand. The much-hyped Fully Self-Driving (FSD) technology too is one of the overpromised and underdelivered projects from the company. The long-promised FSD remains elusive.

All of these have dented Tesla's brand image gradually. The automaker's market share of EV sales in its home country US is now five per cent, significantly down from 65 per cent less than two years ago, claimed a New York Times report.

Erratic Elon Musk

While there are many factors playing their respective roles in the development of the current multipronged challenging situation for Tesla, at the root of the OEM's troubles is the mercurial Musk. The automaker's CEO Elon Musk, who is also the CEO of rocket company SpaceX and the owner of social media platform X (Previously known as Twitter) has alienated many consumers from the Tesla brand with his polarizing behaviour.

Despite invoking innovation in the segment with his big swings, Musk is eschewing the conventional carmaker strategy of offering gradual upgrades each year and introducing a few new models each decade, which is taking a toll on Tesla's brand image, claims the report.

This strategy is not helping the company to have a winning formula in the car business, which has been always driven by incremental updates and the regular introduction of new cars.

What lies ahead for Tesla

Despite the recent softening sales of electric vehicles, electric vehicles are likely to see a rise in number of models and sales in the long run, especially with the growing focus on environmental concerns and the cost-effectiveness of EVs. Electric cars are expected to get much better with their technologies, range and reliability. Batteries are expected to become lightweight and more powerful, offering improved range. Also, with the rising demand and increasing supply, prices of electric cars are likely to come down.

These developments will make it easier for the auto companies to gain more market share, squeezing Tesla's monopoly. If Tesla is not going to impress consumers with the latest advanced features or new cars, things will be further challenging for Tesla. The automaker may not go away anytime soon, but if it doesn't change its attitude, it won't be long before Tesla will be battling for survival.