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Tesla (TSLA) Faces Declining Registrations: Model 3 Sales Fall 36% in California

Quiver Editor

Tesla's (TSLA) California electric-vehicle registrations plunged by 12% in 2024, underscoring significant challenges for the automaker in its pivotal domestic market. High interest rates, mounting competition, and a less competitive restyled Model 3 sedan have all contributed to this decline, signaling a critical juncture for the company in one of its key regions.

Despite the overall downturn, the Model Y crossover remains a standout performer, capturing the top-selling spot with approximately 129,000 units delivered. In stark contrast, the Model 3 sedan experienced a dramatic 36% year-over-year drop in sales, marking Tesla’s fifth consecutive quarterly decline as reported by the California New Car Dealers Association.

Market Overview:
  • California EV registrations down 12% in 2024 reveal market challenges.
  • Model Y leads with strong sales while Model 3 falls 36% year-over-year.
  • High interest rates and fierce competition are reshaping the EV landscape.
Key Points:
  • Fifth consecutive quarterly decline signals structural issues.
  • Global deliveries fell for the first time amid rising borrowing costs.
  • Elon Musk's political engagements may be impacting consumer sentiment.
Looking Ahead:
  • Analysts anticipate continued pressure in Tesla’s domestic market.
  • Potential policy shifts, including changes to the EV tax credit, could affect demand.
  • Tesla must innovate rapidly to counteract competitive and regulatory headwinds.
Bull Case:
  • Despite a 12% decline in California registrations, Tesla’s Model Y remains the top-selling vehicle in the state with approximately 129,000 units sold, showcasing its continued dominance in the EV market.
  • California’s overall EV market grew by 1.2% in 2024, and Tesla still holds a majority 52.5% share of the Zero Emission Vehicle (ZEV) market, maintaining its leadership position despite increased competition.
  • Global EV adoption continues to rise, providing Tesla with opportunities to expand sales outside of California and offset regional declines.
  • The introduction of the refreshed Model 3 sedan and the Cybertruck creates potential for Tesla to regain momentum as new models attract consumer interest in 2025.
  • Analysts forecast Tesla’s global deliveries to increase by 16% in 2025, reflecting optimism about the company’s ability to navigate challenges and capitalize on growing demand for EVs.
Bear Case:
  • Tesla’s fifth consecutive quarterly registration decline in California highlights mounting challenges from intensifying competition, rising interest rates, and slowing demand in its largest U.S. market.
  • The Model 3 sedan experienced a steep 36% drop in sales in California, signaling potential brand fatigue and increasing pressure from rivals offering more affordable or innovative alternatives.
  • CEO Elon Musk’s political involvement and support for Donald Trump may alienate Tesla’s customer base in left-leaning California, further complicating its sales outlook in the state.
  • The potential elimination of the $7,500 federal EV tax credit under Trump’s administration could reduce affordability for Tesla vehicles, negatively impacting demand across the U.S.
  • Broader global headwinds, including high borrowing costs and competition from Chinese and European automakers, contributed to Tesla’s first annual global delivery decline in a decade, raising concerns about its ability to sustain growth.

Beyond California, Tesla’s challenges extend globally, with first-time declines in overall deliveries due to stiff competition from Chinese and European automakers. This trend, combined with internal strategic issues, poses significant questions about the company's long-term market position.

As regulatory uncertainties mount, particularly regarding potential federal EV tax credit changes, Tesla faces an uphill battle to sustain its dominance. The company’s future will depend on its ability to adapt to evolving consumer preferences, refine its product offerings, and navigate a complex competitive landscape.

About the Author

David Love is an editor at Quiver Quantitative, with a focus on global markets and breaking news. Prior to joining Quiver, David was the CEO of Winter Haven Capital.

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