Once considered the golden child of the EV revolution, Tesla now grapples with a harsh reality: the magic may be wearing off. Investors pinned high hopes on a refreshed Model Y to ignite sagging sales, but early signs suggest that this strategy has stalled before leaving the garage.
Amid escalating competition and controversies swirling around its enigmatic CEO, Elon Musk, Tesla’s latest moves feel less like a comeback and more like a scramble. What was supposed to be a rejuvenation of a best-selling EV has instead revealed deeper cracks in the company’s foundation, from weakening demand to surplus inventory and unfulfilled promises.
When Tesla unveiled the new version of the Model Y in January, it was meant to signal that the company could still set the pace in an increasingly crowded electric vehicle market. Instead, consumer reception has been tepid at best. The new Model Y is so similar to its predecessor that most customers can’t tell the difference. As Jessica Caldwell, head of insights at Edmunds, put it, “No one’s looking at that vehicle thinking, ‘Oh, that’s different and new,’ and I think that may be part of the issue.”
To spark interest, Tesla resorted to offering zero-percent financing, a strategy that, while common among traditional automakers, is uncharacteristic for a company that once prided itself on scarcity and high margins. This change in tone has not gone unnoticed. Loren McDonald, chief analyst at EV data firm Paren, told Reuters, “Why would you discount and have all these incentives and offers literally out of the gate? That just doesn’t make sense when your margins are already at multi-year lows. That suggests very strongly that there is a demand problem.”
The demand slump is not confined to the U.S. market. In China, Tesla’s sales have plummeted, and in Europe, analysts are already murmuring about a potential “death spiral.” These challenges are compounded by Elon Musk’s controversial public persona and alignment with far-right politics, which have alienated segments of the consumer base.
Yet, paradoxically, Tesla’s stock is surging. Investor optimism was buoyed by recent political developments — namely, former President Donald Trump backing off from harsh China tariffs and Musk’s assurances that he will be more focused on running the company. Tesla shares have climbed more than 18% in the past five days, momentarily restoring their trillion-dollar valuation. However, this financial uptick seems increasingly disconnected from Tesla’s operational struggles and declining brand perception.
Compounding the issue is the ballooning inventory of unsold Cybertrucks, with more than 10,000 units reportedly sitting idle. Musk had ambitiously forecast selling 250,000 of these futuristic pickups annually, a goal that now looks wildly optimistic.
Still, Musk remains unfazed, betting Tesla’s future on a new vision: fully autonomous robotaxis. He claimed during a recent earnings call, “There will be millions of Teslas operating fully autonomously in the second half of next year.”
But given his history of overpromising and underdelivering, skepticism remains high.
