Has Tesla peaked? Why the electric brand may be running out of charge - and what it can do to fix it as cars such as the BYD Seal, MG4 and Kia EV6 threaten its dominance | Analysis

Tesla is the darling child of the electric car movement. Its sleek and shiny Model 3 and Model Y are rushed into the arms of awaiting customers as quickly as they can be built. Or at least that was the case 12 months ago.

Things have been very different for Tesla in 2024 with sales for the first half of the year down 9.6 per cent on the same period in 2023. So, are we witnessing the beginning of the end for Tesla? Or is this just the inevitable slide into its place on the sales charts?

Make no mistake, Tesla has still enjoyed a good year, its 23,116 sales were enough for it to sit inside the top 10 sellers list in 10th spot, just behind MG and Nissan. But it has been hit with multiple months of sales not reaching the record levels of a booming start to 2023.

Across the industry June sales were down 4.2 per cent on 2023, but overall the market is up 8.7 per cent, so Tesla cannot blame a tough economy. Perhaps it’s just supply constraints then?

Yes and no. Tesla started the year poorly, delivering just 1107 cars in January, which caused such alarm the FCAI declared the electric car craze officially over (but I digress). However, Tesla bounced back in February with a very strong month to prove there is still demand for its two models.

The rest of the year has been up and down. Sales have been steady and prices have been cut, which suggest it’s an issue of demand softening rather than supply. All of which leads to the root cause of Tesla’s seemingly slowing sales trajectory - it is running out of potential customers.

Tesla Model 3 (Image: Tom White)

Electric vehicle sales are up more than 16 per cent in the first half of 2024, but they still only make up a relatively small percentage of the total market, 7.9 per cent. The real issue though, is Tesla only offers two options - Model 3 and Model Y - and both are mid-size and in the premium ($60,000+) segment of the market. Tesla may sell strongly in those segments, but combined the premium mid-size sedan and mid-size SUV markets make up just 7.4 per cent of total sales. 

Put simply, there just aren’t enough people that want to buy a Model 3 and Model Y for Tesla to maintain its rapid sales growth.

For Tesla to grow it needs one thing - more cars. Unfortunately, it doesn’t look like any help is coming in the near-future. The Cybertruck remains a mysteriously vague non-starter in right-hand drive and the talk of a more-affordable Model 2 remains just that, talk.

Tesla Model Y (Image: Richard Berry)

It’s a safe bet adding the Cybertruck would give the brand another major sales boost, but there’s no public confirmation on whether it will be offered here, let alone when, which means even under the best-case scenario it’s more than a year away.

Not that car companies can’t thrive on a limited model range, Isuzu is out-selling Tesla with its double-act MU-X and D-Max, while Ford is second on the sales charts thanks primarily to the Ranger (even if the Blue Oval does have multiple other models contributing at a smaller level).

Without any new additions, Tesla will likely have to rely on the age-old trick of subtle model year styling and value updates to keep its sales appeal fresh. But if it can stabilise its sales at its current levels - around 2000 units per month for the Model Y and 1700 for Model 3 - it should remain a top 10 selling brand.

Tesla Model Y (Image: Richard Berry)

And Tesla will also need to hope other brands don’t offer more appealing and more affordable electric vehicles at the same time…