Tesla Q2 California Sales Crash by 24% On Stiff Competition
Q3 California sales should dive further as Musk just endorsed Trump last week
Sales of Tesla cars in California—the “EV Mecca” of the US—plunged by 24.2% YoY during Q2 2024 (see Figure 1). This is shocking, as California is not only 35% of US sales (down from 38% in 1H 2023), but also the fourth largest region of sales after the US (ex-California), China, and the EU (see Figure 2). California was 13% of Tesla’s 2023 global sales but dropped to 12% in Q2.
Tesla essentially created the EV market in the US by growing to critical mass in California after the Model S launch in 2012, yet it’s now losing massive amounts of market share in the Golden State (see Figures 3 and 4). The main points about this data and the outlook follow below the charts in Figures 1 through 4.
Figure 1: Tesla Price Cuts Since Q4 2022 Don’t Work in California
Source: CNCDA
Figure 2: California Is 35% of Tesla US Sales But Falls the Most
Figure 3: Competition Begins To Harm Tesla Sales
Source: CNCDA
Figure 4: Tesla’s Q2 California Market Share Falls 16-% Points YoY
Source: CNCDA
California was 13% of Tesla’s 2023 global sales: As can be seen in Figure 2, California is the fourth largest region of sales for Tesla after China, the US (ex-California), and the EU. California’s weight of Tesla’s global sales dropped from 12.8% in 2023 to 11.7% in Q2 2024. Tesla sales dropping by 48% YoY in Germany during Q2 (see more in the Final Thoughts section below) is nothing compared to seeing Q2 sales in California drop by 24% YoY: Tesla’s Q2 sales of 52,081 cars in California were 6.3x larger than its 8,217 vehicles sold in Germany during Q2.
Tesla’s price cuts aren’t working: Despite Tesla’s average unit prices being down by 16% in Q1 2024 versus Q4 2022 (when Tesla first cut US prices by 10%), sales are cratering in California, America’s most vibrant EV market. This is largely due to 6 rivals growing their sales rapidly in California to the detriment of Tesla (see Figure 5 below). While Tesla’s California sales in Q2 were down 24% YoY, EV sales (ex-Tesla) surged by 45% YoY and overall passenger car sales (ex-Tesla) were slightly up by 0.5% YoY.
Tesla’s model lineup is stale; Competition has become more attractive: During the 1H of 2024, Tesla saw its sales in California drop by 20,899 vehicles YoY, while its top 6 competitors (see Figure 5 below) grew their California sales by 18,407 units YoY. This is a classic sign of a carmaker suffering from a flawed product strategy and being under attack by rivals. It should be noted that the rivals causing the most harm to Tesla sales in California appear to be Hyundai/Kia, BMW, Benz, Ford, and Rivian.
Figure 5: The Competition is Catching Up To Tesla
Source: CNCDA
Q3 California sales could be worse for Tesla: While the 24% YoY decline in Tesla’s Q2 California sales was shocking (the Q1 2024 decline of -8% YoY firmed up a bit from -10% YoY in Q4 2023), Q3 should be worse. Not only is the growth hurdle still high (Q3 2023 California sales were up 41% YoY), but the current Q3 is when Musk tweeted out his endorsement of Donald Trump for the 2024 presidency. While it is very likely that Q2 sales in California were already impacted by Musk’s far-right antics on Twitter, things could get even worse in Q3 given Musk’s endorsement and news that he’d contribute $45 million per month to a Trump super PAC (report on that here).
Final Thoughts: It’s Not Only California
Tesla’s sales in California are nearly twice the size of the top-3 car markets in the Eurozone during Q2 (the UK, France, and Germany). The Q2 Eurozone numbers—which also came out yesterday—were equally shocking, if not more: Tesla saw its Q2 EU sales drop by 16% YoY while the total passenger car market there grew by 4% YoY and the BEV market was up by 2% YoY. What’s more is that Tesla sales in the Eurozone’s largest car markets (the UK, France, and Germany) are all down by double digits.
Tesla is one of the few carmakers to have aggressively cut its prices in order to maintain sales volumes of its stale model lineup (at an average age of 5.6 years per model in 2024, Tesla has the oldest fleet in the global auto industry where the average is 3 years). Most carmakers are seeing roughly flat pricing as their deliveries grow on new model launches, although competition is heating up and both prices and volumes are beginning to soften, globally (which will only harm Tesla more).
There is no quick fix to Tesla’s declining volume and price woes until it comes out with another smash hit like the Model Y (68% of global deliveries in the 1H of 2024 and down 4.5% YoY). But this is something that doesn’t seem likely soon because of the following factors:
Musk had nothing concrete to say about new products on the Q1 earnings call. He, in fact, cut off Bernstein’s analyst (once again) when asked a tough question about how exactly Tesla could roll out new models on the existing Model 3/Y platforms next year. This was a dead giveaway of how there’s nothing really percolating in Tesla’s new model pipeline in the near future and could point to small tweaks in the Models 3/Y, which won’t boost sales (look at flagging sales and price cuts of the Models S/X/3 since they were “refreshed”).
Most carmakers require around 4 years to build a new model on a new platform. Tesla always takes longer, as can be seen with the Cybertruck roll-out (over 5 years), and even simple things like making minor changes to the Models S/X/3, which caused a 3 to 6-month shutdowns of their production lines.
The new-car market is beginning to weaken. Some think we’re entering a recession. If car demand weakens—more affordable hybrids and petrol cars outselling expensive EVs is a clear sign of weakness—Tesla could blow a hole in its balance sheet (see my report on how Tesla could become insolvent here if macro conditions deteriorate). Q2 earnings results could shed more light on this and my preview from last week (here) sees non-GAAP EPS of $0.41, which is 32% below consensus estimates of $0.60.
Anecdotally, as someone who lives in the very EV friendly Santa Monica, all Tesla's look practically ancient compared to the Rivians and BMWs I now see more of around town.
Brad, these #s are bad, but --
1: What's the source for the California model #s?
2: The decline is driven by a total collapse in Model 3 sales, the Y held up OK. That kind of divergence makes me question claims of general brand collapse.