Tesla quarterly sales plunge as Musk backlash grows

By Akash Sriram

(Reuters) -Tesla's first-quarter sales slumped 13%, its weakest performance in nearly three years, as backlash to CEO Elon Musk's embrace of far-right politics grows and as consumers seek out newer models from rival electric-vehicle makers.

The EV maker's stumbling sales indicate that the one-time leading brand is reeling from the fallout of the company not refreshing its vehicle lineup in years, and Musk's foray into politics in the United States and Europe. The company posted weak sales in numerous European markets and in China, even as more consumers are opting for EVs.

Musk's role in spearheading federal cost-cutting in the United States and support of far-right parties in Germany and other nations have produced a sharp response across the world.

Protests have spiked, and Tesla cars and dealerships globally have become targets for vandalism. Some Tesla owners have traded in their vehicles, not wanting to be associated with Musk's name.

On Tuesday, a left-leaning judge won a seat on the state of Wisconsin's highest court after Musk spent more than $20 million backing her opponent in the race, leading to angry protests from residents declaring that democracy was "not for sale." 

In the January-March period, the company recorded a bigger-than-expected drop in sales to 336,681 vehicles, down from 386,810 units a year ago, the company said Wednesday. The expectation was for 372,410 vehicles delivered, according to an average estimate of 15 analysts from Visible Alpha -- but in recent days analysts had braced for even worse figures, which follows the company's first-ever decline .

"We are not going to look at these numbers with rose-colored glasses...they were a disaster on every metric. The Street and us knew a bad 1Q was coming but this was even worse than expected," said Wedbush Securities analyst Dan Ives.

Shares of the automaker fell 2% on Wednesday, extending a run of weakness from mid-December that has cost the company roughly 45% of its value. 

Last year, Musk forecast 20% to 30% sales growth in 2025, promising to launch an affordable vehicle in the first half of the year. But after enjoying a leading position among EV makers for years worldwide, China's BYD is set to unseat Musk's company as the top global EV seller for the first time this year with a 15.7% market share, ahead of Tesla's 15.3%, according to Counterpoint Research. 

“There’s no way to sugarcoat it, Tesla’s first-quarter delivery numbers are a disappointment, though many investors were already preparing for a soft number. A drop from last year is no surprise, but the scale is worse than many had expected," said Hargreaves Lansdown senior equity analyst Matt Britzman, who holds Tesla shares.

Investors are waiting to see if refreshed models like the Model Y and incentives have helped counter weak demand and tough race from Chinese rivals including BYD and European competitors such as Volkswagen and BMW.

Tesla's sales in key European markets fell again in March, with sales in France and Sweden dropping for a third straight month.

Tesla began offering the refreshed Model Y with updated styling and enhanced interiors in China late February and in the U.S. and Europe last month. 

Tesla has indicated plans to launch a lower-priced model based on its existing platform this year, but is yet to release specific details about the vehicle.

Its pricey Cybertruck pickup, launched in late 2023, has seen limited demand due to its polarizing trapezoidal design and quality concerns. Tesla recently recalled nearly all Cybertrucks to address a potential exterior panel issue.

While Tesla may see less pain from the new 25% tariffs on imported vehicles due to its U.S.-based manufacturing, Musk has said cost implications are "significant". Tesla has also warned about potential retaliatory tariffs in response to the levies.

(Reporting by Akash Sriram in Bengaluru; Editing by Sayantani Ghosh, Arun Koyyur and Chizu Nomiyama)