Tesla Needs A Radical Strategy To Turn Around. How About Acting Normal?

Tesla Needs A Radical Strategy To Turn Around. How About Acting Normal?

Tesla CEO Elon Musk scored a big win recently when his $56 billion pay package got the green light from shareholders a second time, but the company he runs has been far less fortunate in 2024. 

On Tuesday, Tesla reported that its global car deliveries slumped by 5% this past quarter, as compared to the same period last year. If you’ll recall, it was a similarly crummy story in Q1, when Tesla logged an 8.5% drop in vehicle sales year-over-year. Granted, Q2’s declines weren’t nearly as apocalyptic as some predicted, and Tesla still owns about half the U.S. market for EVs. But at a time when sales of electric cars from other brands are skyrocketing, it’s not great news. After years of stupendous sales growth, there’s no denying that the automaker that kicked this all off is hitting some serious roadblocks.

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Tesla’s struggles in 2024

Make no mistake, Tesla is still the U.S. market leader—by far—in electric vehicles. But its sales are slumping this year. Experts say that’s largely due to a stale model lineup and increased competition, particularly in China. 

The big question going forward is this: Can Tesla turn the tide sooner rather than later? A flagging Tesla is bad news for U.S. EV sales as a whole.

Experts polled by InsideEVs said that Tesla can pull some levers to boost sales, but what it really needs are new or substantially reworked models that expand and rejuvenate its aging product lineup. They said Tesla can’t lean on the success of two super-popular vehicles, the Model 3 sedan and Model Y SUV, indefinitely.  

In other words, Tesla needs to start acting more like a regular car company if it wants to keep growing. That means offering new models, and substantive updates, more frequently. Given Musk’s obsession with AI, robotics and self-driving taxis—and his reluctance to share a detailed product roadmap for Tesla—it doesn’t look like that’s in the cards. 

“If you’re looking at Tesla as a car company, I don’t see where the solution comes from to really rebound” this year, said Corey Cantor, an EV analyst at BloombergNEF. “There’s a lot of challenges piling up ahead of them, and we don’t have any answers on how they’re going to change course.”

2024 Tesla Model 3 (Highland) at a destination charger

The Tesla Model 3, AKA the California Camry. 

In the first half of 2024, Tesla has delivered some 830,000 vehicles worldwide, a 6.5% drop from the same period last year. So, to end the year on par with last year’s 1.8 million sales, the company will need to move nearly 1 million cars in the back half of 2024—no small feat. According to preliminary estimates from Cox Automotive, Tesla’s U.S. sales in Q2 came in around 148,000 units, a 15% slide from the same quarter last year. So Tesla has its work cut out if it wants to rebound.

Experts said that Tesla needs more than rapid-fire price cuts or generous financing rates—strategies it’s already employed—to turn things around. Tesla could ramp up its marketing efforts to bring more buyers into the fold, said Jessica Caldwell, head of insights at Edmunds. The company has historically relied on word-of-mouth marketing and Musk’s megaphone to sell cars. Now that it’s trying to capture more mainstream buyers, advertising that centers around the Tesla ownership experience or the superiority of the Supercharger network could help. 

“It’s a shift in what they have done, but it’s what other companies are forced into doing,” Caldwell said. Tesla has already been dabbling more in web-based advertising than ever, but it doesn’t run TV commercials like other automakers do, for example. 

Tesla Model Y charging

The Tesla Model Y.

However, the issue at the heart of Tesla’s flagging sales is its stale product portfolio, experts said. The Model 3 and Model Y have been shouldering its growth for years, and they comprised 95% of this year’s deliveries. The higher-end Model S sedan and Model X SUV have receded into irrelevance. The Cybertruck is new, but it’s too out-there and low-volume to make a real impact on Tesla’s sales over the long-term, industry analysts expect. (On the latest sales report, the Cybertruck has been unceremoniously lumped in with the Model S and Model X under “Other Vehicles.”) The Model 3 received a makeover this year, but it may not be noticeable enough to mainstream buyers. 

“Consumers like new stuff,” said Stephanie Valdez-Streaty, director of industry insights at Cox Automotive. By opening up its vast network of Supercharging stations to cars from other manufacturers, Tesla ceded a key advantage, she said. That makes the need for fresh, compelling products even more critical as competition in the EV space heats up.

For years, Tesla has touted plans for a cheaper model that could broaden the company’s appeal. That may be coming soon, judging by Tesla’s recently announced plan to “accelerate the launch of new models” including “more affordable vehicles.” Such a car would be a big deal, but it’s not the only way to inject some life into Tesla’s lineup. 

Tesla Model X and Tesla Model S

Tesla Model X and Tesla Model S

The company also lacks options for current Tesla owners to upgrade to, said Cantor. Tesla could launch more luxurious Model 3 or Model Y variants that serve as stepping stones to the Model S and Model X. It could revamp the aging Model S and Model X (which have been on sale since 2012 and 2016, respectively) to make them stronger competitors to new entrants from the likes of Cadillac and BMW, he said. It could expand into segments it isn’t in right now. 

“Tesla’s still missing out on some of the really big segments in the U.S., whether you’re thinking about three-row SUVs, thinking about minivans, thinking about commercial vans,” Cantor said. “So I think it’s not just making them cheaper, but look at the segments that you’re missing out on.”

Major carmakers like Volkswagen, Toyota and General Motors sell in the enormous volumes they do because they have a model for every price point and consumer. Tesla has said it wants to compete on that level, but its product strategy doesn’t reflect that yet. 

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Surveys have also shown that Musk’s right-wing politics and online antics may be repelling would-be Tesla buyers from the brand. So toning down the public outbursts—you know, like most executives of enormous companies do—could benefit Tesla too. 

From a global perspective, Tesla’s biggest problem is in China, however. While its U.S. sales decline wasn’t as bad as expected, Tesla is tanking hard in the world’s biggest car market, with sales of China-made EVs (which does include some exports) down 24% since last year. In China, a huge crop of new homegrown brands can turn out new models at a pace the auto industry has never seen before. That gives Chinese consumers a massive range of choices and products to upgrade to within brands they like. Tesla offers no such options.

On the bright side, some EV makers not named Tesla are having a great year. It’s important to note, though, that since they’re starting from a much lower baseline than Tesla is, growth comes easier. General Motors notched its best half of EV sales ever as new models like the Chevrolet Equinox EV, Chevrolet Blazer EV and Cadillac Lyriq start to pick up steam. Kia’s electric sales more than doubled in the first half of the year to nearly 30,000 vehicles. 

So it’s clear that the EV market is growing in the U.S. and around the world. What’s less obvious is Tesla’s place in it over the long term. 

Contact the author: tim.levin@insideevs.com 

In recent years, Tesla has become a household name in the electric vehicle industry, known for its innovative technology and sleek designs. However, the company has faced a number of challenges that have raised concerns about its long-term viability. With a growing number of competitors entering the market and ongoing production issues, Tesla needs a radical strategy to turn around its fortunes. One potential solution? Acting normal.

Tesla has long been known for its unconventional approach to business. From its direct-to-consumer sales model to its eccentric CEO, Elon Musk, the company has cultivated a reputation for being anything but normal. While this approach has certainly generated a great deal of buzz and excitement, it has also created its fair share of problems. Musk’s erratic behavior, in particular, has been a source of controversy, with his tweets often causing confusion and turmoil for investors and customers alike.

To turn things around, Tesla may need to consider adopting a more traditional approach to doing business. This could involve hiring a more experienced management team to help steer the company in the right direction, as well as implementing more rigorous and transparent corporate governance practices. By focusing on building a solid foundation and establishing clear lines of communication, Tesla could help restore confidence in its brand and reassure investors that it is on the right track.

Furthermore, adopting a more normal approach could also help Tesla better compete in the increasingly crowded electric vehicle market. As more and more traditional automakers announce their plans to transition to electric vehicles, Tesla will need to find ways to differentiate itself from the competition. By focusing on delivering high-quality products and exceptional customer service, Tesla can set itself apart in a positive way, winning over customers and generating repeat business.

In conclusion, Tesla needs to rethink its approach to doing business if it hopes to remain a dominant player in the electric vehicle industry. By adopting a more normal strategy that focuses on stability, transparency, and customer satisfaction, Tesla can help rebuild its brand and secure its place in the market. While this may require some changes to the company’s culture and leadership, the potential benefits of acting normal are too great to ignore. It is time for Tesla to make a radical shift in strategy and embrace a more traditional approach to doing business.