A couple walks past a Tesla showroom in Chongqing, China.
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In 2016, Elon Musk promised to never provide discounts for new Tesla cars, tweeting that “there can never – and I mean never – be a discount on a new car coming out of the factory in pristine condition, where there is no underlying rationale.”
But in recent months, Tesla has started offering significantly cheaper leases for its best-selling Model 3 and Model Y for as little as $299 per month (a figure that bakes in a $7,500 federal tax credit that Trump wants to kill) – down from more typical lease prices of hundreds of dollars more. It’s also revived discounts for new customers, who can now receive $2,000 if they get a referral code from an existing Tesla owner, and is offering interest-free loans in China.
There’s a clear reason: the top EV maker is headed for a 6% decline in U.S. sales, per industry forecaster Cox Automotive. And even though deliveries continue to grow in China, a decline in orders in the U.S. and Europe may be enough this year for Tesla to see its first-ever drop in sales globally. These discounts look like a ploy to juice the numbers and bring in more orders as the year comes to a close.
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Tesla “had a challenging 2024,” Charlie Chesbrough, a senior economist at Cox said in a briefing on Tuesday. Cox also expects the Musk-led brand to see its share of U.S. EV sales dip to 49.5% this year, from 55% in 2023. “Increasing EV competition from traditional [automakers] is taking a toll and Tesla’s performance in 2025 is likely to be more of the same.”
Globally, Tesla sales are down 2.3% in the year’s first three quarters and it needs to deliver a record 515,000 EVs this quarter to avoid its first global decline since it began making the Model S in 2012. Musk in October said he expected the company to eke out a small delivery increase for 2024, but analysts aren’t so sure: current consensus expectations are for Tesla to deliver about 500,000 vehicles in the year’s last three months. China, a bright spot for the company, should account for nearly 210,000 units in the quarter, Deutsche Bank analyst Edison Yu said in a research note.
The company’s sluggish auto business, which generates 80% of its revenue, hasn’t impacted its sky-high stock price, which has jumped 91% since Musk helped bankroll Trump’s victory — boosting his wealth to an unprecedented $464 billion. The stock’s valuation, with a price-to-earnings ratio of 131, is many times higher than that of other automakers and far ahead of the other six “Magnificent Seven” tech stocks, running far ahead of even AI darling Nvidia. Investors expect that Trump 2.0 will mean lighter regulations for companies like Tesla, the end of safety investigations of its vehicles and plants and new laws that will make it easier to operate the robotaxis that Musk believes are essential to its future growth.
Elon Musk speaks with U.S. President-elect Donald Trump at a test flight of the SpaceX Starship rocket.
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But he’s yet to prove Tesla can match Alphabet’s rapidly expanding Waymo robotaxi business. The potential for “delays to robotaxi rollout or car accidents” is among reasons to be cautious on Tesla going forward, said Baird equity analyst Ben Kallo.
Discounting new vehicles is an old and standard auto industry practice, though it’s one Musk used to claim Tesla would avoid as it erodes profit margins and resale values. But now, along with cheap lease offers, Tesla is also offering discounts if buyers select a vehicle from the company’s unsold inventory. In China, Tesla’s top source of profit, sales are rising, aided by no-interest loan offers and cash discounts on the Model Y, said Deutsche Bank’s Yu.
One challenge for Tesla’s EV business is that its lineup is long in the tooth and limited compared to automotive rivals. Setting aside the polarizing $100,000 Cybertruck, Tesla hasn’t added a new mainstream vehicle since the Model Y nearly five years ago. Its second-best seller, the Model 3, has looked pretty much the same since it came out in 2017. By contrast, Hyundai is about to add a three-row electric SUV to its lineup of Ioniq models, including the 5 hatchback and 6 sedan, as well as its luxury Genesis GV60 and GV70 models. GM, which is the fastest-growing EV maker in the U.S. this year, recently added the battery-powered Blazer and Equinox models and may have a new version of its $30,000 Bolt EV coming in 2025, along with the high-end Cadillac Lyriq SUV. All of those vehicles are selling well and arrived in just the past year or two. In California, the country’s largest market for EVs, buyers who dislike Musk’s politics are sourcing on the brand and may be more inclined to choose a competitor.
Cheaper Models
Musk has promised to respond by releasing a long-promised, more affordable Tesla. “We are still on track to deliver our affordable models starting in the first half of 2025,” he said in the October results call. Doing so could mean “20% to 30% vehicle growth next year,” he told analysts and investors.
There’s speculation about a so-called Model Q that might arrive next year, or Tesla may just offer cheaper versions of the Model 3 and Y. But those expectation are contradicted by Musk’s comments in October when he shoot down the idea of the long-anticipated $25,000 Model 2 budget EV.
“We’re not making a non-robotaxi model,” he said in response to a question about Model 2 in October. “We’ve made it very clear that the future is autonomous.”
“New EV sales will continue to rise with market share expected to tip over 10%”
The addition of cheaper Teslas is a positive for the company, though sales “will be lumpy” as they’re rolled out, given time needed to ramp up production, Baird’s Kallo said in a research note.
While the overall pace of U.S. EV sales slowed a bit in 2024, Cox estimates the segment will be up 7% this year to a record 1.3 million vehicles, up from just over 1 million last year. The outlook for 2025 is a bit murkier as it’s expected that Trump may eliminate Biden’s EV tax credit, though such a change will have to be approved by Congress since the incentive is part of the Inflation Reduction Act that passed in 2022. As a result, it may not go away until mid-2025 at the earliest, and perhaps not until 2026, Jonathan Smoke, the chief economist for Cox, said in the Tuesday briefing.
The leading U.S. auto forecaster expects Tesla’s U.S. sales this year to reach 632,808, down from 673,770 in 2023. The decline in the company’s share of the domestic EV market is even more dramatic, shrinking from 80% in 2020 to less than 50% this year, as Hyundai, GM, Ford, Rivian and other rivals gain ground.
Despite concerns about Trump policy changes, the growing number of new EV models and a general decline in prices will aid the market. “New EV sales will continue to rise with market share expected to tip over 10%,” said Stephanie Valdez Streaty, Cox’s director of Industry Insights.
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