Tesla’s challenges run deeper than controversy around Elon Musk

“This has been our family car for three years, and it has been an absolute dream,” says Ben Kilbey as he shows me his gleaming pearl-white Tesla Model Y.

Ben is a staunch electric car advocate. He runs a communications firm that promotes sustainable businesses in the UK. Yet now, he says, the Model Y has to go – because he disapproves vehemently of Tesla CEO Elon Musk’s actions, especially the way he has handled firing US government employees.

“I’m not a fan of polarisation, or of doing things without kindness,” he says. “There are ways of doing things that don’t ostracise people or belittle them. I don’t like belittlement.”

Ben is part of a wider backlash against the Tesla boss that appears to have been gathering momentum in recent weeks, since Musk was appointed head of the controversial Department for Government Efficiency (DOGE), charged with taking an axe to federal government spending.

Musk has also intervened in politics abroad, making a video appearance at a rally for the far-right party Alternative für Deutschland ahead of Germany’s parliamentary election, as well as launching online attacks on British politicians, including Prime Minister Keir Starmer.

For some who do not share his views, it has all become too much.

There have been protests outside dozens of Tesla dealerships, not only in the US, but also in Canada, the UK, Germany and Portugal.

Although most of them have been peaceful, there have been cases of showrooms, charging stations and vehicles being vandalised. In separate incidents in France and Germany, several cars were set on fire.

In the US, the Tesla Cybertruck, an angular metallic pickup truck, appears to have become a particular magnet for anti-Musk sentiment. A number of social media videos have shown vehicles daubed with swastikas, covered with rubbish or used as skateboard ramps.

US President Donald Trump was quick to show his support to Tesla, by allowing the company to show off its vehicles outside the White House, and pledging to buy one. He said violence against US showrooms should be treated as “domestic terrorism”.

Musk has also been unequivocal in his response. “This level of violence is insane and deeply wrong,” he said in a recent interview with Fox News. “Tesla just makes electric cars and has done nothing to deserve these evil attacks.”

What is hard to quantify is exactly how much impact all this has had on Tesla as a business – and the extent to which Musk’s views and involvement in the Trump administration has affected the brand and alienated some traditional electric vehicle buyers.

And if that is the case, can Tesla really build on its past success with Musk remaining at the helm?

Two decades ago, Tesla was a tiny Silicon Valley start-up, with a handful of employees and big dreams of revolutionising the motor industry. Today it is the best-selling producer of electric vehicles in a growing global market, with giant factories around the world. It is also widely credited with having proven that EVs could be fast, powerful, fun and practical.

Musk, the figurehead of the company, has driven this all forward, since he joined Tesla in 2004 as its chairman and principal funder. He became chief executive four years later, and has held that role throughout the company’s rise to prominence.

“Tesla was the pioneer,” says Stephanie Valdez Streaty, director of industry insights at car sector marketing and software firm Cox Automotive. “They kind of got EVs into the mainstream, got other manufacturers to start investing, and really created a lot of awareness.”

It is easy to forget that electric cars were once derided as slow, uninspiring and impractical, with minimal range between charges. The Tesla Model S, which went on sale in 2012, had sports car performance and a range of more than 250 miles. It played a key role in changing perceptions, and provided a springboard for rapid growth.

Nowadays, Tesla is not just a producer of electric vehicles. It has invested heavily in autonomous driving systems, with the goal of building fleets of driverless “robotaxis”. It also has a fast-growing energy-storage business, and is developing a general-purpose humanoid robot, known as Optimus.

Like the late Steve Jobs at Apple, Musk became the embodiment of his brand, ever present as the front man at company events and product launches, with a devoted following among EV enthusiasts.

But recently the champion of sustainable technology has become equally well known for promoting his political views, amplifying them through his own social network, X. At the same time, Tesla itself has been facing mounting challenges.

Although its Model Y was the best-selling car worldwide last year, overall sales fell for the first time in more than a decade, dropping from 1.81 million to 1.79 million.

The decline was relatively small, and Tesla retained its position as the world’s best-selling maker of electric vehicles, but for a growth-focused business, it raised alarm bells. Profits for the year were also down.

This year has also begun badly, notably in Europe, where there was a 45% fall in new registrations in January compared to the same month in 2024. There were further falls in major European markets in February – although the UK was an outlier, with sales rising 21% – as well as in Australia.

Meanwhile, shipments of Tesla’s Chinese-made cars, which are produced for sale both in China and abroad, fell more than 49% in the same month.

In early March, Joseph Spak, Wall Street analyst at Swiss bank UBS, published a research note in which he predicted a decline in Tesla’s worldwide sales this year of 5%. That forecast, which countered market expectations of 10% growth, helped to send Tesla’s share price tumbling. It fell 15% in a single day – adding to an overall decline of 40% since the start of the year.

Sales can fall for many reasons, and people within Tesla have suggested that a drop in sales was to be expected as the company geared up for the launch of the new Model Y – with potential customers holding off for the latest version. But research by brand monitoring firm Morning Consult Intelligence suggests Musk’s activities have indeed harmed Tesla, particularly in the EU and Canada – although not in China, which remains one of its biggest markets.

In the US, it says, the situation is more nuanced, with many consumers approving of DOGE cuts in government spending. However it adds: “Musk may be turning off those US consumers most likely to buy a Tesla. Among high-income consumers who say they plan to purchase an EV in the future, Tesla now ranks lower compared with competitors than it did one year ago.”

Tesla did not respond to the BBC’s questions concerning its fall in sales.

But experts believe Tesla’s problems run deeper than simply questions about the public image of the CEO.

To start with, the current model range, which was once cutting edge, now looks uninspiring. The once ground-breaking Model S has been on sale since 2012, the Model X since 2015. Even the more recent and more affordable Model 3 and Model Y are beginning to look dated in an increasingly competitive market.

“If you look at their product line-up, they haven’t had any fresh models recently, except for the Cybertruck, which is really niche,” says Ms Valdez Streaty. “They’ve had a refresh of the Model Y, but it’s not a big splash. And there’s so much more competition out there.”

Prof Peter Wells, director of Cardiff University’s Centre for Automotive Industry Research, makes a similar point: “We’ve not seen the level of innovation in terms of the product range that perhaps Elon Musk should have been looking for. I think that is a big part of their problem.”

Competition comes from a number of directions. Traditional manufacturers have invested huge sums in moving towards EV production, with the likes of Korea’s Kia and Hyundai building a growing reputation for making good quality battery-powered cars.

At the same time, an array of new EV brands has emerged from China. They include the likes of BYD, which has expanded rapidly by supplying cars with good performance at low prices, as well as the more upmarket Xpeng and Nio, which have focused on luxury and advanced technology.

“China has amazing incentives and subsidies for EVs,” says Ms Valdez Streaty.

“You can see how Chinese firms, especially BYD, continue to grow not only in China but in other parts of the world. So that definitely is a huge threat, not just for Tesla but for other manufacturers as well.”

The extent of that threat was demonstrated in mid-March, when BYD announced it had developed an ultra-fast charging system that would provide a car with 250 miles of range in just five minutes – significantly faster than Tesla’s own supercharger network.

Musk’s comments during Tesla’s earnings calls suggests his priorities lie elsewhere, particularly in driverless vehicles.

In January, he claimed Tesla would have a robotaxi service operating in Texas by June. But this attracted a cynical response from some commentators who pointed out that Musk has been promising this kind of thing for a long time.

In 2019, for example, he said that within a year there would be a million Teslas on the road capable of acting as robotaxis. Meanwhile Tesla’s “Full Self Driving” package, available to Tesla buyers, remains a “hands-on” system that requires the driver to be paying attention at all times.

“Every year we get a new promise from Elon Musk about how his autonomous cars are just around the corner. The trouble is, they never seem to be able to find the corner to emerge from,” says Jay Nagley of automotive consultancy Redspy.

Arguably, Tesla needs strong leadership right now. But regardless of his politics, the chief executive is spinning a large number of plates. He owns or runs an array of other businesses, notably his social media platform X; the artificial intelligence firm xAI; and the private space firm SpaceX, which has experienced failures on the last two launches of its giant Starship rocket.

Asked in a recent interview with Fox Business how he was combining all of this with his new government role, Musk responded “with great difficulty”.

“It’s hard to tell exactly how much Tesla is hands-on managed nowadays by Musk,” says Prof Wells.

“If he’s making the key decisions over things like product placing and where factories are built and so forth, then those decisions have to be correct. And I think you need someone with a hands-on, 100% commitment to understanding the automotive industry, and making those decisions correctly.”

Ever since he joined Tesla in 2004, Elon Musk’s position has been unassailable. There is no obvious sign at the moment of that changing. He remains the company’s largest single shareholder, with a 13% stake – currently worth more than $95bn.

That is more or less matched by the combined holdings of investment giants Vanguard and Blackrock, while a number of other financial institutions including State Street Bank and Morgan Stanley hold smaller stakes.

For those investors, the recent falls in the share price will have made grim reading. But it is still almost 30% higher than it was a year ago. In fact, the recent decline has simply wiped out the effects of a dramatic surge that occurred immediately after the election, which almost doubled Tesla’s market valuation.

Today, Tesla is still valued at more than 100 times its earnings – a far higher margin than automotive rivals such as Ford, General Motors or Toyota, which suggests shareholders are continuing to pin their hopes on technological breakthroughs and rapid growth.

“Tesla is being valued as a company that is either going to dominate electric vehicles – which is clearly not going to happen, given the strength of the Chinese manufacturers – or that is going to dominate robotaxis and autonomous vehicles,” says Mr Nagley.

None of the major investors appears to be agitating for change at the moment – although in media interviews this week, one long-term shareholder-turned-vocal critic, the investment fund manager Ross Gerber, did call for Mr Musk to step down.

But analysts say the business would benefit from new blood at the top. “A new CEO for Tesla would without question be the best thing for the company right now,” says Matthias Schmidt of Schmidt Automotive Research.

“It would address the toxic contagion from Musk, offer a solution for the conflict of interest regarding his DOGE position, and allow a dedicated CEO to focus entirely on the job in hand.”

“I think that’s the clear direction of travel at the moment.” says Prof Wells. “I think they need somebody with strong automotive experience. Someone who knows how to rationalise the business.

“It needs a significant change of direction now.”

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