Tesla Poised For Tough Q1 Report Amidst Plethora of Challenges

Tesla, an American manufacturer of electric vehicles is facing a challenging start for 2025, as the EV giant is poised for a tough first quarter, as it prepares to release its Q1 report.

The company is currently confronting a plethora of challenges which include plunging demand in Europe, reflecting both operational and market difficulties, rising competition in China, and a backlash against CEO Elon Musk’s political role in Trump’s administration.

Tesla and its dealerships have been targeted in a string of attacks across the country as infuriated liberals’ protests Musk’s drastic cuts to the federal government. With its showrooms vandalized, which has seen production lines pause, the automaker is currently confronting a significant problem. Escalating reports of vandalism at Tesla dealerships and charging stations across the US have prompted the FBI to create a task force to target the perpetrators.

Musk has unveiled his plan to fight what he calls ‘domestic terrorists’ targeting Tesla cars and showrooms. Also, the US President Donald Trump declared last month that anybody caught engaging in the vandalism would be considered domestic terrorists, a claim Musk reiterated.

Following these challenges, analysts anticipate 390,000 deliveries for the period, down from 460,000 projected in January. Also, Wall Street analysts have lowered their expectations as Musk’s political maneuvering has fueled a consumer backlash that is eroding global demand for the US top-selling electric vehicles.

Tesla is currently battling with profitability, as sales in California, its main market in the U.S., plummeted 31% in January from a year ago. European numbers are worse, dropping 43% in the first two months of 2025. In Europe, sales plunged by roughly half during the first two months of the year, even as industrywide EV sales grew 28%. Sales figures in France showed a 37% decline in March, marking the third straight monthly decline and the weakest Q1 in the country since 2021.

In China, one of its most important markets, Tesla is grappling with intensified competition, where domestic EV makers like BYD are gaining ground. The company has resorted to price cuts to maintain market share, which, while boosting sales volume in some instances (such as a record 196,902 deliveries in China in Q4 2024), has squeezed automotive margins. Margins hit a low in Q4 2024 and are expected to face further pressure in Q1 2025 due to idle capacity and ongoing price reductions. Sales of its vehicles crashed 29% through February.

This decline in the numbers of sales will set the tone for the rest of the year, as Tesla aims to return to growth after logging its first annual sales drop in over a decade last year.  The first quarter is typically Tesla’s slowest in terms of sales, in line with broader industry trends. On top of that, its four factories underwent weeks of planned downtime to retool a refreshed Model Y SUV.

“There’s supply disruption because of the herculean task that they did,” said Ben Kallo, a senior research analyst at Baird. “They’re ramping down four factories and then re-ramping them across three different supply chains. I think that it also will spill” into the second quarter, he said in an interview.

Another layer of complexity comes from external perceptions tied to CEO Elon Musk’s political involvement. Musk’s role in the Trump administration’s Department of Government Efficiency (DOGE) has sparked controversy, with some analysts and investors pointing to potential “brand damage” as a factor in declining demand. Protests and vandalism targeting Tesla in the U.S. and abroad, alongside a reported $15 billion drop in brand value in 2024, highlight this sentiment.

However, the extent to which this affects sales remains debated, with some arguing that supply-side issues, like the Model Y transition, outweigh these concerns.