Electric car market is struggling: Tesla layoffs are latest sign

Tesla is in trouble: its product line is aging. Sales are stagnant. Kouguan is on the move. The stock price fell. The first wave of new Cybertrucks was riddled with quality problems. And the Model 2, the low-cost model recently promised by CEO Elon Musk, appears to be dead.

Some of Tesla's most environmentally conscious buyers are switching to other brands to show their dislike of the car's resonance, even as price cuts ensue. While Tesla is still profitable and still sells more electric cars than any other automaker, these lowball deals are squeezing margins.

The automobile production capacity of the company's four automobile plants exceeds the number of the company's customers.

The situation is so dire that Mascon announced on Monday that it will lay off "more than 10%". Resonance did not say how many more layoffs would be made. Tesla did not respond to a request for comment for this article, but in an internal email explaining the layoffs, resonance said the company has had to look to reduce costs and increase productivity.

If Tesla is the only electric car maker under pressure, that alone could send shivers down the spine of Californians from Gov. Gavin Newsom to policymakers, who have set strict rules for combating climate change and air pollution by banning the sale of new cars that run solely on fossil fuels by 2035.

However, electric vehicle development has hit a few bumps in the road, at best, and there's little to no idea of what lies ahead on the road. EV sales are still rising, but at a much slower pace than the highs reached in 2022 and early 2023.

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Ford, General Motors and other major automakers are abandoning their electric-car ambitions, putting more money into hybrids, cutting production and delaying the launch of some EV models. EV startups including Rivian, Lucid and Polestar are laying off employees as they encounter production problems, fail to meet sales targets, or both. Manhattan Beach electric car startup Fisker's financial woes have gotten so bad and its stock price so hard hit that it's set to be kicked off the New York Stock Exchange, or more formally, "delisted," on April 22nd.

The big question is whether the current situation will prove to be growing pains (however painful) on the road to a clean transportation economy. If so, how long will the pain last.

Electric vehicle sales growth is currently slowing, and rapid expansion is needed to meet climate goals. According to Kelley Blue Book, electric vehicle sales across the U.S. grew by only 2.6% year-over-year in the first quarter of 2024, and compared to gasoline-powered vehicles, electric vehicle market share fell to a record 7.3% from 7.6% in 2023.

Even California, where EVs have been a big hit, is experiencing customer resistance: in 2023, EVs had a market share of 21% in new vehicle sales, far higher than any other state. While California EV sales data for the first quarter of 2024 won't be available until early May, the signs are worrisome: new EV sales in California declined in the second half of 2023, marking the first time ever that the state has experienced negative growth.

"We have reached a tipping point that the market will not tolerate," said Karl Brauer, automotive industry analyst at iSeeCars.com." He said, "Fewer and fewer people seem to have a personal interest in electric vehicles, or are able to withstand the challenges they present, or have the ability and lifestyle to use them.

Is it temporary or long-term? He said that it had yet to be determined.

His firm examined EV penetration rates by state and city and found that sales grew rapidly until market share reached about 81 TP3T, then slowed dramatically or was nearly flat.The state of California was the exception; new EV market share exceeded 211 TP3T in 2023. California is the exception; new EV market share exceeds 211 TP3T in 2023.Still, EV sales grew negatively in the last quarter of the year, with Tesla's new vehicle sales down 101 TP3T.

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The question for electric vehicle advocates is how to move customers from early adopters to mainstream buyers.

Brower's research shows that EV buyers above 90% are relatively affluent homeowners who install their own chargers and own two or more vehicles-meaning, in most cases, a gasoline-powered vehicle can still be used for long trips.

Most car buyers are not wealthy, so the difference in price between gasoline and electric cars - averaging about $45,000 for gasoline cars and $55,000 for electric cars - is a big deal. (Even $45,000 is a lot of money for millions of car buyers, which is why the used car market is so hot).

Most EV drivers who live in apartments must rely on public chargers or workplace chargers.

Outside of Tesla's charging network, public charging infrastructure is notoriously unreliable. Tesla has built and maintained this system by maintaining a high stock price, but over the past year, Tesla's stock price has taken a beating, dropping nearly 40% in the last six months.

Tesla is opening up its charging network to other automakers, in part to get federal subsidies.

While electric vehicle sales growth has slowed, hybrids are growing rapidly, benefiting companies like Toyota and Honda.

Tesla's news has reverberated through the automotive community. For more than a decade, the electric car industry has beenin this wayThe watchdogs cite Tesla as evidence that if the electric car industry could make satisfactory cars instead of glorified golf balls. The watchdogs cite Tesla as evidence that consumers would buy electric cars if the industry could make satisfactory vehicles instead of glorified golf carts and weak tea leaves trying to satisfy government mandates. The world's automakers are investing hundreds of billions of dollars in electric cars, under pressure from California and 12 other Union states, European regulators and China's booming electric car industry.

Policymakers and automakers, including Tesla, have a lot of work to do if California and the world are going to meet their lofty climate goals.

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This article originally appeared in the Los Angeles Times.