- Tesla faces a challenging first quarter in Europe, with significant declines reported in key markets like Sweden and France, potentially impacting the company’s overall performance until the new Model Y arrives to revitalize demand.
Elon Musk’s Tesla faces a potentially dire first quarter and challenging first half in Europe as it phases out its bestselling Model Y in favor of the refreshed version known as Juniper.
Tesla sales in a number of major European markets nearly halved in January, according to a report from EV enthusiast website Electrek.
Demand had been tempered by some buyers waiting for Juniper to arrive in March.
Responsible for two-thirds of all Tesla demand, the Model Y is absolutely crucial. In its refreshed state, it could rekindle Tesla’s ailing car business entirely on its own.
Fortune couldn’t independently verify the figures, as most countries have yet to report official monthly registrations, but data from two major countries that have published results both showed heavy contractions.
Tesla volumes dropped 44% in EV-friendly Sweden and 63% in France.
Polestar sales eclipse Tesla in Sweden
Industry analyst Matthias Schmidt, founder of Schmidt Automotive Research, warned these drops were partly the result of calendar year effects, as sales were boosted in January 2024 by the launch of the refreshed Model 3.
Juniper’s arrival now proves crucial for Tesla, at least until a new entry model is rolled out later this year.
“This will be arguably the first real test of how well Musk can retain customers,” Schmidt told Fortune.
Many Tesla drivers leased their vehicles through third-party financing companies in 2022 when demand was booming thanks to generous government subsidies combined with a drought of competition for Tesla.
Now, their three-year contracts are running out at a time when rivals like Germany’s premium brands offer alternatives that are much more competitive, such as the Mercedes-Benz EQC and Audi Q8 e-tron.
Take the Swedish market, for example. Domestic brand Polestar doubled sales to 473 cars in January thanks to its new crossover model, edging out Tesla’s 405 units after Musk’s brand suffered a hefty decline.
‘Musk shot himself in the foot’
Additionally, Musk’s embrace of the anti-immigrant, antiestablishment far right is viewed far more skeptically in Europe.
Now EV-friendly countries like the Netherlands—once occupied by Nazi Germany—are starting to experience “Tesla shame” even before the most recent controversy around Musk’s inauguration day salute.
“An arm movement like that is highly sensitive here [in Europe],” Schmidt added, citing recent decisions by German companies to no longer associate themselves with the Tesla CEO.
“Musk shot himself in the foot just at a time when a large proportion of his customers are about to return to the new car market.”
One important caveat is that January 2024 was the last strong month for growth in Tesla sales, with registrations soaring 86% to roughly 17,500 vehicles across Europe thanks to the Model 3 refresh.
The subsequent February saw a 20% gain, with Tesla’s problems across Europe really only becoming fully evident thereafter.
Can the new Model Y ‘Launch Series’ save the day?
This means that, for the first two months of this year, Tesla will likely suffer heavy declines until it laps February 2024, and year-on-year comparisons will start to become easier as the bar drops.
The biggest question facing Tesla is how soon new models like the Juniper can begin driving sales.
Deliveries begin in March, traditionally the strongest month of the European car sales calendar, but sales of any new car model typically start slow until production can ramp to full capacity.
Moreover, Tesla intentionally started with a high-priced “Launch Series” aimed at early adopters willing to splurge to be the first on their block to own one of Musk’s latest cars.
The refreshed Model Y Launch Series starts at €60,990 in Germany and £60,990 in the U.K., and it combines some of the most popular added options, like larger rims and a tow hitch.
Unlike in the U.S., however, it doesn’t come with Full Self-Driving included—an option costing an extra €7,500 in Germany and £6,800 in the U.K.—so the embedded value is less significant.
By comparison, customers can still purchase the outgoing version with the same long-range, all-wheel-drive specification in white with smaller wheels for €5,000 less.
