Tesla’s vehicle sales have been on the skids globally for months. The big question has been: Can the long-awaited, redesigned Model Y crossover help turn things around?
In January, on the heels of its first annual decline in deliveries in over a decade, Tesla unveiled a refreshed version of its bread-and-butter small SUV. Six months later, however, the automaker’s sales are still sliding. It’s clearer than ever that the updated model’s snazzy light bar and smoother suspension won’t be enough to get the troubled company growing again.
“I think we may have seen peak Model Y sales already,” Loren McDonald, chief analyst at the EV charging data firm Paren, said, referring to the U.S. market.
In the second quarter, Model Y sales in the U.S. fell 15% year-over-year, to some 86,000 units from over 101,000, Cox Automotive estimates. That was also far fewer than the roughly 105,000 Model Ys Tesla delivered in America in Q2 2023. The shortfall contributed to an overall decline in the U.S. for Tesla of 12.6%, or around 20,000 cars.
The new Model Y failed to reinvigorate the SUV’s sales in China and Europe, too, according to estimates from a Tesla analyst that goes by Troy Teslike. Tesla reported that its global vehicle deliveries fell 13.5% in Q2. To match 2024’s numbers, the automaker would need to string together two record quarters and ship over 1 million vehicles in the back half of the year. With the federal EV tax credit going away after this quarter, that doesn't sound too likely.
After years of runaway growth, Tesla is likely to face another year of declining sales if it doesn’t do something drastic: act like a regular car company. That means rolling out more models across different price points and segments, analysts said, and not relying on two vehicles to drive nearly its entire car business.
Tesla did not return a request for comment.
Why Tesla Sales Are Falling
The Model Y was still far and away America’s best selling electric model in Q2. And sales jumped significantly from the first quarter, when Tesla had to change over its manufacturing lines across the world to start making it, leading to factory downtime. Now that Model Y production is humming along at full clip, Tesla can no longer blame supply-side constraints for the drop off. Demand for the crossover just isn’t as great as it was a year ago.
The new Model Y was never going to take Tesla’s sales to the next level, says Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions.
“A mid-cycle enhancement, such as the one on the Model Y, does not typically spark sales,” he said in an email.
Tesla is facing a myriad of headwinds, making it tough to pin down one key “why” behind the slowing sales. For the Model Y in particular, the updates may not have gone far enough to capture buyers' attention.
There's also Elon Musk’s off-putting political activity and general consumer unease around the economy. Meanwhile, Tesla is far from the only automaker facing sluggish EV sales. America’s electric market contracted by 6% in Q2 despite the introduction of over a dozen new models, Cox Automotive said, reflecting weaker demand across the board.
Perhaps the biggest factor working against Tesla and its best seller is plain old competition. Since the Model Y launched in 2020—and probably because of it—an array of electric compact SUVs have hit the market. The Model Y is still a great option, but now buyers have their pick of a Chevrolet Blazer EV, an Acura ZDX, a Cadillac Lyriq or a Nissan Ariya. And the list goes on. In markets outside the U.S., Tesla needs to contend with flashy and well-priced Chinese EVs like the Xiaomi YU7.
McDonald expects Model Y sales to be flat or down in the U.S. throughout this decade. “There's just going to be too much other choice, too many other compelling models that are coming out,” he said.
Tesla's biggest advantage is pricing, Fiorani said. As the only profitable EV maker in America, it has more leeway to drop prices than rivals. But that can only take it so far, he said, because Ford, GM and the rest are bound to stop losing money on EVs eventually as they scale up. They also currently subsidize their EV programs profits from gas cars and trucks, which Tesla cannot do.
New Teslas Can't Come Soon Enough
Meanwhile, the Cybertruck isn’t doing much for Tesla’s top line either. After an initial period of hype, the outrageous pickup’s sales have tanked.
It all puts extra pressure on Tesla’s upcoming products to fuel its next phase of growth. The EV maker has said it’s working on “more affordable models,” which were supposed to start launching by June. It’s still unclear what those will be like, but Tesla has suggested they’ll be cheaper cars based on the Model Y and Model 3 sedan.
For a company that has bet the farm on robotaxis and AI but still is fundamentally a car company, putting out some fresh sheet metal is crucial, analysts say. A van, a more conventional pickup truck and a more rugged SUV are all openings for the company.
McDonald expects Tesla’s sales to grow in the U.S. throughout the rest of the decade—“if they do what they should do and become a real car company.”
Contact the author: Tim.Levin@InsideEVs.com
