Tesla’s (TSLA) struggle to maintain its dominance in the electric vehicle market is intensifying in Europe, where the automaker experienced a precipitous 45% drop in sales during January.
The decline comes amid a surge in overall EV demand, raising questions about Tesla’s competitive position and the potential impact of CEO Elon Musk’s increasingly controversial public image.
According to data from the European Automobile Manufacturers’ Association (ACEA), only 9,945 Tesla EVs were registered in Europe in January, down from 18,161 a year ago.
This stark decline stands in sharp contrast to the overall EV market, which saw sales jump by 37.3% during the same period, with Germany, the UK, and the Netherlands leading the way.
The negative sales data sent Tesla stock tumbling nearly 7% in early trading on Tuesday, with shares now down 24% year-to-date.
Several factors may be contributing to Tesla’s sales woes.
One possibility is that customers are holding back purchases of the Model Y in anticipation of an upcoming refresh.
However, the emergence of compelling new EV models from Volkswagen, Renault, and China’s SAIC Motor likely played a significant role in eroding Tesla’s market share.
Musk’s political footprint: a brand liability?
Adding to Tesla’s challenges, CEO Elon Musk’s increasing involvement in European politics is generating controversy and potentially damaging the company’s brand image.
Musk’s apparent support for Germany’s far-right wing AfD party, which recently secured the second-most seats in Parliament, has drawn criticism in the country.
Musk also made a hand gesture at a political rally in the US last month that was widely interpreted as a “Nazi salute,” although Musk has vehemently denied the claim.
His call for jailing UK Prime Minister Keir Starmer isn’t helping the Tesla CEO’s image in Britain either.
The latest data confirms a troubling trend that emerged earlier this month with the release of weaker country-by-country figures for Tesla.
Germany reported only 1,277 new Tesla vehicle registrations in January, a staggering decline of nearly 60% compared to the same month in 2024.
Spillover effects were also seen in France, where January sales plummeted 63%, as well as in Norway (down 38%) and the UK (down 12%).
While competition from established European automakers and rising Chinese EV makers is undoubtedly a factor, some analysts believe Musk’s foray into politics is exacerbating Tesla’s challenges.
Oppenheimer analyst Colin Rusch suggests that the timing of Musk’s political activities couldn’t be worse.
“We view Mr. Musk’s political activity and increased regionalization as a potential overhang on TSLA sell-through. We see the biggest risk in CA and the broader EU, where TSLA has seen ongoing declines since the start of 2023,” Rusch wrote earlier this month, also highlighting softening January sales in China as a concern.
Others, however, believe that the impact of Musk’s political views on Tesla’s brand image can be minimized.
“We view this as containable brand issues for Tesla for now that are not a major cause for concern,” Wedbush analyst Dan Ives wrote on Monday, alluding to Musk’s political forays.
Investors will gain further insights into Tesla’s performance when the company releases its first-quarter production and delivery numbers in early April.
These figures will provide a clearer picture of the extent to which competition, production delays, and CEO-related controversies are impacting Tesla’s sales trajectory.
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