US firm Tesla's electric vehicle (EV) sales have continued to fall this year — but as a result of structural factors, such as increased competition, duties and the arrival of Chinese carmakers in the market, and not because of chief executive Elon Musk's public profile, market participants have told Argus.
Tesla's European sales fell by 11pc in 2024, having risen by 56pc in 2023 (see graph). In January 2025, Tesla's sales fell by 63pc on the year in France, 59.5pc in Germany, 44.3pc in Sweden, and 37.9pc in Norway.
The smaller 7.8pc fall in the non-EU UK could be explained by the different tariff regime. Some Tesla models sold in Europe are manufactured in Shanghai, and the UK has decided not to impose tariffs on Chinese-made EVs, while the EU imposed a 7.8pc duty on Tesla's Chinese-made EVs in October.
Demand for Teslas in the UK, France, Germany and US began to decline in April last year, according to Ben Marks, founder of Electrify Research. Marks also pointed to "notable drops in July and October, by which time Tesla had fallen from the first to fourth-placed brand — trailing Audi, BMW and VW".
According to a survey conducted last month by car testers Electrifying.com, of 455 non-EV drivers, 56pc would be happy to buy Chinese, while 59pc have been put off buying a Tesla by the public profile of chief executive Elon Musk, although some market participants pointed to other problems.
"Tesla's problems are likely not to do with British motorists' perceptions of Elon Musk, and more to do with the fact that Tesla haven't released a new car since the Model Y, while its competitors have been playing catch-up," independent transport research organisation New AutoMotive's chief executive, Ben Nelmes, said.
And with Chinese EV makers now in Europe, and over 130 mainstream EV models available in the UK, "competition has never been fiercer", Electrifying.com chief executive Ginny Buckley told Argus. "[Tesla's] dominance is no longer guaranteed."
Meanwhile, Slovakian battery maker InoBat's vice-chair, Andy Palmer, said Tesla "needs to think long and hard about its positioning and product offers if it wants to stop bleeding market share".
Tesla models also rely on production of a battery chemistry that is increasingly concentrated in China(see graph).
Standard-range versions of Tesla's best-selling Model 3 and Model Y both use lithium iron phosphate (LFP) batteries, rather than premium nickel-cobalt-manganese-based (NCM) batteries.
And while input costs of LFP-based EVs have edged down to a discount to NCM-based EVs (see graphs), domestic LFP production has enabled Chinese carmakers such as BYD to sell their models at prices that are increasingly competitive with Tesla.
Tesla better placed to cope than legacy carmakers
Tesla's Model Y is still comfortably the best-selling EV model, according to research firm Jato Dynamics.
"One of the things with car sales, particularly retail sales — it's not logical, otherwise everyone would drive a Toyota Corolla. People drive the new shiny things. Tesla used to be the shiny thing with the Model Y, but not so much now," the founder of ratings service The Car Expert, Stuart Masson, told Argus.
Until recently, Tesla "showed you don't have to make design changes for the sake of it" according to Masson, going against prevailing wisdom. Tesla's cars often still topped ratings for safety, battery efficiency and technology after 3-4 years on the road.
Tesla is "better placed to cope" with Chinese competition because it "doesn't have a lot of legacy infrastructure", Masson added. The firm has never had dealers, as conventional carmakers have, or big showrooms that require steady monthly sales. Instead, it operates its own showrooms and interacts with customers directly over the internet, cutting out the middleman used by established dealer networks.
Volkswagen, by contrast, "can't sack anyone in Germany because of the unions and local government that have seats on the board; they veto any attempts", Masson said. "It's haemorrhaging money, and it knows full well that most expensive factories are in Germany, but it can't get rid of them."
Volkswagen Group's operating profit dropped by 42pc on the year to €2.9bn in the third quarter of 2024 and its operating margin was just 3.6pc.
Tesla also makes a much bigger profit from EVs than any western car company, so it can better afford to reduce prices.
The firm is also now much more than just a carmaker, Masson added, having launched an energy storage gigafactory in Shanghai this week.
"From cars to battery storage, superchargers, robo-taxis and robo-vans, they've launched several concepts that have never gone to production, but they tend to find their feet in every market," Masson said. "I think it will still be okay, but we're not going to see continued growth of 100pc per year … I think there are a lot of car companies that are in far more trouble."
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