Where did Tesla’s demand went?

More than any other American company, Tesla (TSLA -5.41%? deserving credit to make the electric vehicle (EV) industry viable. After decades or even generations of talking about an electric car, Tesla has taken the concept of mainstream, scaling of production and turning a tidy profit against long odds and defying expectations.

This success in an industry that many believe that eventually will replace traditional combustion vehicles along with its great promises of autonomy, has allowed Tesla to earn a sky -high valuation and a market hood now well over $ 1 trillion, which is compared to peers like General Motors and Ford This trade in single -digit multiples of their earnings.

According to the storage diagram below, things continue to look good for Tesla. As you can see, the stock has jumped 56% since the end of 2023 and overcome a previous setback last year.

TSLA Data of Ycharts.

But now, now Tesla’s full -year results in 2024 are a look at the number indicates that the company is much weaker than the stock wave indicates, and according to a number, Tesla could be in serious problems.

Picture source: Tesla.

Tesla’s falling car sales

Investors already knew that Tesla’s sales of vehicles fell by 2024 and fell by 1.1% to 1.79 million, but EV Titan just confirmed that car revenue had also fallen last year, 6% fell to $ 77.1 billion. Total revenue still rose 1% this year to $ 97.7 billion thanks to the growth of its energy storage and generational business and services that are primarily software-based. But vehicles are the core component of the business, and its services that make up $ 10.5 billion in revenue also depends on them.

Tesla’s decline in car revenue means that both volume sales of its vehicles and the average sale price decreased. This happened even when it rolled out the new cyber truck and presumably also expanded its production functions.

Tesla lowered the prices of its vehicles last year. It is not quite clear why, but typically lower prices for staying competitive with the market and moving stock, and these rules also apply to Tesla. According to conventional financial laws, when prices fall, demand must go up, but that’s not what happened to Tesla. Instead, the demand continued to fall.

CEO Elon Musk has complained time and time again over the impact of high interest rates on demand, but high interest rates have affected all car manufacturers equally. Tesla acknowledged in its fourth -quarter earnings report that “affordable prices remain the top of the mind for customers.”

As the diagram below shows, Tesla’s market share among all vehicles, not only EVs, has fallen over the past year in North America and Europe, while it has risen slightly in China, the world’s largest EV market.

Picture source: Tesla.

As you can see, Tesla’s market share plateau has for the past two years and even began to fall. The company’s challenges extend beyond the general slowdown in the electric vehicle market; It also loses the overall market share in the automotive industry.

There is no clear reason for this plateau, though there are several factors that seem to have caused it. These include increasing competition from other EV producers, a base of early adoptors for EVs who seem exhausted, concerns about range and charging, and perhaps some fatigue, especially since Tesla has been slow to update its fleet, as opposed to traditional car manufacturers who release new models every year.

Can Tesla return to growth?

Musk continues to give great promises around autonomy, and if Tesla pulls out full self -driving and robotaxis, as he imagines it, the current break in growth doesn’t matter. However, the market seems to overlook the obvious challenges facing the company.

Tesla said it has a capacity of three million vehicles and it expects to return to the vehicle’s growth in 2025, although it did not give specific numbers. Analysts expect 19% revenue growth this year, most of which should come from the growth of the vehicle.

For the time being, investors appear to have confidence in Musk as the stock rose after hours despite lack of estimates, but Tesla could have a long way to fall if demand continues to be challenged. Given its high valuation, the Tesla share seems to have more to lose than win at this time.