Jonathan Wong Tesla terminated Henkes last year, who then sued the company, claiming he was sacked for voicing safety issues. (Photo: Photo by Craig Adderley from Pexels) Tesla reported its first-ever annual decline in vehicle deliveries on Thursday, signaling challenges for the electric vehicle pioneer as it faces increased competition and shifting market dynamics. The company delivered 1,789,226 vehicles in 2024, falling short of the 1.81 million delivered in 2023. Fourth-quarter deliveries totaled 495,570 vehicles, below analysts' estimates of over 503,000, and production reached 459,445 units for the same period. The announcement caused Tesla's stock to drop by as much as 7% in Thursday trading, reflecting investor concerns over the company's ability to maintain growth. Tesla's late-year stock rally, which pushed shares up 63% in 2024, had fueled optimism, but the delivery shortfall has tempered that enthusiasm. Analysts polled by LSEG had expected annual deliveries to reach 1.806 million units. Tesla CEO Elon Musk previously warned investors that growth would slow this year, despite expectations for higher sales than in 2023. "Higher sales this year than last year" were anticipated, but the pace of growth was not expected to match the 38% increase achieved in 2023, Musk said during Tesla's April earnings call. Competition in the EV market has intensified. Tesla, once the dominant player, now faces rivals from multiple fronts, including BYD in China, Hyundai in Korea, and European automakers like Volkswagen and BMW. In Europe, Tesla experienced a steep decline in registrations, falling 14% from January to November compared to the same period in 2023. Data from the European Automobile Manufacturers' Association showed registrations dropping to 18,786 in November from 31,810 a year earlier. China, Tesla's largest international market, also presented headwinds. The Model Y remained the second-best-selling EV in the country, but its growth was slower than the overall market, which expanded by 8%. Brands such as BYD and Li Auto grew significantly faster, eroding Tesla's market share. According to Fiorani, a vice president at Auto Forecast Solutions, BYD's aggressive expansion has put additional pressure on Tesla. In North America, Tesla maintained dominance but resorted to price cuts and incentives, including zero-interest financing, to stimulate demand. Despite these efforts, Tesla faced inventory buildup, particularly with the Cybertruck. Analysts have raised concerns about weaker-than-expected demand for the trapezoidal, stainless-steel vehicle, which starts at around $80,000. Tesla's focus remains on developing self-driving technology and launching a driverless ride-hailing service by 2027. However, most of its profits still come from vehicle sales, and the lack of more affordable models has been criticized as a missed opportunity to capture broader market share. Patrick George, editor-in-chief of InsideEVs, commented that Tesla "made a mistake not bringing more affordable EVs in 2024" and noted that Cybertrucks are "piling up on used car lots." The company also faced challenges from reduced subsidies in Europe and a shift in the U.S. market toward lower-priced hybrid vehicles. Meanwhile, Tesla's political and business dynamics drew attention as Musk contributed $277 million to President-elect Donald Trump's campaign and pledged to co-lead an advisory group aimed at cutting federal spending and regulations. Some observers have questioned whether these activities have distracted Musk from Tesla's operations. Despite the challenges, Musk remains optimistic about the future. During an October earnings call, he projected growth of 20% to 30% in 2025, driven by the introduction of lower-cost EVs and advancements in autonomous driving technology. Wall Street analysts expect demand to rebound as U.S. interest rates decline in the coming year, potentially creating more favorable conditions for Tesla. © 2024 Business Times All rights reserved. Do not reproduce without permission. More From BusinessTImes