Reuters has reported a 10% drop in registrations of Tesla vehicles in California for the last quarter of 2023. This marks a significant decline in sales, the first of its kind within the past three years, during which the state has been a pivotal location for the EV revolution in the United States. The last occurrence was during the third quarter of 2020, when the Covid pandemic impacted markets worldwide.
California typically accounts for approximately 10% of all Tesla vehicles sold globally, making it one of the company’s most critical markets. Data from the California New Car Dealers Association shows that 47,592 Tesla vehicles were registered in California in the fourth quarter, in contrast to 52,782 in the previous year.
Globally, Tesla experienced record sales in the fourth quarter following price reductions. CEO Elon Musk attributed the price cuts to high interest rates, which led to increased monthly payments, negatively impacting demand for Tesla cars and necessitating price reductions.
Analysts have suggested that Musk’s actions and comments, including his endorsement of antisemitic remarks and support of the Republican Party, may have alienated potential buyers. Shahar Silbershatz, CEO of market research firm Caliber, expressed that Tesla’s reputation has suffered since Musk’s involvement with X (formerly Twitter) over a year ago. He stated that 83% of Americans associate Musk with Tesla, and if Tesla’s reputation is affected, it poses a challenge for the company.
Price cuts by Tesla have also affected the market value of its vehicles, potentially dissuading customers and current owners from making further Tesla purchases. Ongoing layoffs at tech companies in California may have further impacted consumer sentiment.
Moreover, competition has increased from brands like Chevrolet, Hyundai, Mercedes-Benz, and BMW, which have expanded their EV market shares in California. Despite a 24.6% increase in vehicle sales by Tesla in 2023, its market share in the electric car segment dropped by 10.5 percentage points. Consequently, Tesla is currently responsible for 60.5% of EVs registered in California.
The Rise Of Hybrids
Hybrid vehicle sales now represent 13.3% of new car sales in California, a substantial increase from 8.7% in 2022. Conversely, the market share of battery electric vehicles in the state decreased to 21.1% in the fourth quarter, down from 22.3% in the previous three months.
The hesitation to purchase electric cars due to charging infrastructure concerns has prompted the resurgence of hybrids, which offer the assurance of a gasoline engine when the battery depletes. Additionally, hybrids address the limitations of battery electric cars, such as reduced range and difficulties with charging in cold weather.
With General Motors considering the reapplication of its Voltec system, it raises the possibility of hybrids making a significant comeback, especially in models like the Canyon midsize pickup truck and various SUVs.
The Last Hurrah For Tesla?
There are concerns about the future of the EV revolution and the role of electric cars, as a shift towards hybrids gains momentum. Questions have been raised about the readiness of charging infrastructure and the future of battery-powered vehicles, potentially indicating the challenge of transitioning to solely electric cars.
The Takeaway
While the EV revolution is crucial, caution is advised regarding the potential deviations from established timelines. Ignoring the warning signs could have consequences for the transition to electric cars.