Tesla's falling sales are a sign that its grip on the EV market is slipping

After reporting a shocking drop in quarterly sales on Tuesday, Tesla appeared to be losing control of the market it created, raising fresh questions about Elon Musk's leadership of the company.

The decline in sales attracted investors as rivals such as China's BYD and Kia and South Korea's Hyundai reported increases in electric vehicle sales.

Tesla pioneered the market for electric vehicles with its Model 3 sedan and Model Y sport utility vehicle, proving that battery-powered cars could be attractive, practical and profitable. Cars revolutionized the automotive industry and forced established automakers to develop their own electric models.

But the market is shaping up against Tesla. Unlike the early adopters who fueled Tesla's growth, mainstream buyers may be put off by the vehicles' unconventional design, minimalist interior, and lack of buttons and switches. All functions in Tesla vehicles are controlled from a large screen on the dashboard.

In a review of the new version of the Model 3, Consumer Reports said in a review Tuesday, “It's completely distracting to adjust anything in the vehicle while driving down the road.

Tesla, which sells cars online, has been the target of complaints about poor service because it doesn't have many showrooms. That could give an advantage to established carmakers like Ford Motor Company and General Motors, which have extensive dealer networks and are ramping up production of electric vehicles.

Tesla seems at a loss to respond to those challenges. It has been slow to follow up its initial success with new models, and Mr. He did not respond Tuesday to sales figures on X, the social media platform he owns. Instead, he lashed out at Walt Disney Company executives, whom he accused of being “woke.” Such comments have made him a hero to conservatives, but may turn off Tesla from liberals who buy more electric cars.

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Tesla said It delivered 387,000 cars worldwide in the first quarter, down 8.5 percent from 423,000 cars in the same period last year. It was the first time Tesla's quarterly sales fell on a year-over-year basis in 2020 since a small decline at the start of the pandemic. The sales figures were expecting a smaller increase than Wall Street analysts had expected.

“Tesla can't stand still,” Ben Ross, president of War Road Research, said in an email. “Chinese EVs are already gaining a foothold in Europe, and it's unclear how long they will be banned from entering the US”

Mr. Rose said.

Of course, some of the sales declines may have reflected production problems beyond the company's control, including a fire at a Tesla factory near Berlin that resulted from an arson attack.

And the company's cars still have many fans. Analyzing the Model 3's controls, Consumer Reports found the latest version offered a better ride and improved handling than its predecessor.

But investors are clearly nervous. Shares of Tesla have fallen more than 30 percent this year — including Tuesday's 5 percent drop — amid concerns that the company has lost momentum.

In China, Tesla faces BYD and dozens of other rivals with plans to expand globally. In Europe, established carmakers such as Volkswagen and BMW have introduced battery-powered models. In the United States, sales of electric cars aren't growing as fast as they were a year ago, and many buyers are instead opting for hybrid models that combine a gasoline engine with batteries and electric motors.

Tesla's competitors continue to report sales increases. BYD said Tuesday it sold about 300,000 electric vehicles, up 13 percent from a year earlier. The company sold 324,000 plug-in hybrid vehicles in the first quarter, up 15 percent.

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BYD and other Chinese automakers have been quick to introduce new models, often undercutting Tesla's prices. The companies also export cars to Europe, Southeast Asia and Latin America.

South Korea-based Kia said Tuesday that sales of its electric vehicles in the U.S. more than doubled in the first three months of the year compared to a year earlier after the launch of a new large sport utility vehicle, the EV9. Kia's sister company Hyundai said it sold more than 10,000 electric vehicles in the U.S., up 75 percent in the first quarter.

Toyota, the world's largest automaker, does not sell all-electric vehicles. But the company said U.S. sales of electrified vehicles, a category made up mostly of hybrids under the Toyota and Lexus brands, rose 74 percent in the first quarter.

Tesla pioneered mass-market electric cars, but its lineup is aging. The company's only new model for 2020 is the Cybertruck, a futuristic pickup that sold in limited numbers last year. The low-cost version that Tesla says it could offer this year starts at around $80,000, making it unaffordable for most car buyers.

Rivian, whose R1 pickup competes with the Cybertruck, saw sales of the truck and its two other models jump 70 percent in the quarter to 13,600 vehicles.

Tesla is working on an electric car that will cost around $25,000, but the model isn't expected to go on sale in large numbers until 2026. Meanwhile, Tesla relies on the Model Y and Model 3 for most of its sales.

The company has repeatedly cut prices, but analysts say the strategy hasn't done enough to boost sales and cut into its profits. The company has recently raised the prices of some cars moderately in the US and China. After a $1,000 increase announced this week, the Model Y starts at nearly $45,000 before federal and state tax credits.

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Gary Black, managing partner of Future Fund, an investment firm published in X, showed that the quarterly sales numbers told Tesla managers that they “need a real sales strategy and can't just rely on price cuts.”

Tesla CEO Mr. Musk gave no clear indication of how the company plans to regain momentum. At the same time, his polarizing statements and endorsement of right-wing conspiracy theories have alienated many left-leaning customers who are more likely to buy electric cars.

Los Angeles resident Raphaelle Cassens gave up her leased Tesla Model Y last year and replaced it with a leased electric BMW i4. He changed Mr. Musk is one reason, he said.

“Honestly, I don't like him as an individual,” said Ms. Cassons, who is a registered Democrat but describes herself as nonpartisan. He also said that he received poor service from the company. “The company's attitude certainly reflects that of the owner,” Ms Cassons added.

At least one major automaker is struggling to sell electric vehicles. GM said Tuesday that its U.S. sales fell 1.5 percent in the first quarter as deliveries of battery-powered cars fell by a fifth to 16,000 vehicles.

The decline in battery-powered vehicle sales is a result of a sharp decline in sales of the Chevrolet Bolt, which GM will discontinue production at the end of 2023. For the loss of the Bolt, which was one of America's most affordable electric cars.

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