NICHOLAS SHUBITZ: Elon Musk hinders Tesla in race against Chinese rivals

The Roman poet Claudian wrote that “men are raised on high in order that they may fall more heavily”, and few have risen higher than Elon Musk. But now the SA-born billionaire’s foray into politics has coincided with a dramatic decline in Tesla sales, while Chinese rivals with better offerings and pricing are rapidly taking over the global electric vehicle (EV) market.    

Musk’s support for right-wing political movements, like Donald Trump in the US and the AfD in Germany, has triggered a backlash, and Tesla sales are plummeting. In Germany, Tesla’s largest European market, deliveries have fallen over 60% this year (which equates to roughly 75% when factoring in the growth of the German EV market over the same period). The numbers are similar across Europe as a whole. Tesla sales have halved even though the market has grown by almost a third.

Revenue figures paint an equally grim picture. Tesla’s net income peaked at about $15bn in 2023 before more than halving to just over $7bn in 2024, and the share price has lost roughly half its value from its peak. JPMorgan has cut its forecast to $120 per share, and if Tesla traded at the historical average price-earnings (PE) ratio of the S&P 500 it could fall below $40. If Tesla stock traded at the same PE ratio as Toyota it would be $15.     

It gets even worse. Reports suggest $1.4bn has gone missing from the company’s balance sheet, the Cybertruck has been recalled (because body work could fall off while the vehicle is in motion), and the company was booted from the Vancouver International Auto Show due to safety concerns. Meanwhile, Teslas are being vandalised and set on fire around the world because of Musk’s politics, further discouraging potential buyers. 

In response, a defiant Musk held a media conference with Trump at the White House, where he vowed to double Tesla production in the US within the next two years. Aside from the ethical concerns surrounding the event, this promise could prove extremely difficult to fulfil. Trump’s steel and aluminium tariffs are set to make manufacturing cars in the US more expensive at a time when price cuts aimed at boosting demand are already eating into Tesla’s profits. 

Both Musk and Trump have a habit of making bold new promises to distract from earlier ones they could not keep. However, while Trump has already won his re-election campaign, Musk still has a car company to run. A strategy based on hype worked well while sales and revenues were increasing, but considering Musk promised Tesla would be producing fully autonomous cars by 2017, the aura of invincibility that once surrounded him and his ventures appears to be fading.

    Musk’s right-wing political stance has certainly alienated a number of liberal “green” consumers, who traditionally made up the bulk of Tesla buyers. US conservatives have typically been less likely to embrace EVs than liberals, with polls consistently showing that Republican voters are far more sceptical of climate change and less concerned about the environment than their Democratic counterparts. 

These negative repercussions for Tesla have also been felt in Canada. Trump’s tariffs on Canada led the city of Toronto to withdraw financial incentives for Tesla vehicles purchased as taxis or ride shares. To promote EV adoption the city reduced licensing and renewal fees until the end of 2029. However, according to Toronto mayor Olivia Chow, Teslas no longer qualify. 

Musk’s obsession with cutting government spending may also be a factor. Considering that his companies, especially Telsa and SpaceX, have received tens of billions of dollars’ worth of tax credits and government contracts, Musk gleefully wielding a chainsaw to promote government spending cuts that put people out of work has come across as gratuitous. 

Perhaps most worryingly for investors, Tesla is also rapidly losing ground in the world’s largest EV market, China. As a result of Trump’s aggressive trade policies Chinese consumers are switching to more affordable and technologically innovative home-grown brands. As a result, Tesla sales on the mainland reportedly fell by about 50% in February alone, and that was prior to the huge tariffs and slew of insults that have since been levelled at Beijing.

While a distracted Musk has seen Tesla flounder, Chinese EV makers are seizing the moment. BYD, a company Musk once laughed at during a Bloomberg interview, has already overtaken Tesla as the world’s largest EV maker by both sales and revenue, despite not being available in the US. Warren Buffett was an early investor and it seems the Oracle of Omaha was as prescient as ever.    

Chinese EV makers are not just competing on price either. BYD has rolled out a new generation of vehicles that can run for 400km after being recharged for just five minutes, and their latest vehicles come equipped with self-driving technology at no extra cost. Compare that to Tesla, which has been charging $8,000 for its Full Self-Driving package, and whose vehicles still take more than four times longer to charge.

BYD and other Chinese carmakers are also taking over from Tesla in overseas markets, expanding their footprint in Europe, Latin America and the Middle East. BYD will reportedly build a third manufacturing plant in Germany to get around EU tariffs on Chinese-made electric vehicles while leveraging lower price tags and cutting-edge technology to attract new customers.

Tesla’s fall from grace is not yet a foregone conclusion, but the challenges are mounting. Musk’s political entanglements have only made matters worse, alienating consumers in key markets and hurting his company’s bottom line. 

Tesla has enjoyed a sustained period of unparalleled success, but bold promises at earnings calls may no longer be enough to maintain sky-high stock market valuations when car sales, revenues and profits are all declining. Can Tesla keep up with the competition while its CEO dabbles in politics, or will determined Chinese competitors such as BYD have the last laugh? 

• Shubitz is an independent Brics analyst.