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Tesla's sales drop to the weakest in nearly three years

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Sales decline was more pronounced than analysts'

expectations

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Tesla faces competition from BYD, Volkswagen, and BMW

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Shares fall 7% in after-market trading after Trump tariff

announcement

(Adds White House comments in paragraph 4, Trump tariffs and

post-market shares in paragraph 6, and Tesla Q1 earnings date in

paragraph 17)

By Akash Sriram and Abhirup Roy

April 2 (Reuters) - Tesla's quarterly sales

plunged 13% to the weakest in nearly three years, hurt by a

backlash against CEO Elon Musk's politics, rising global

competition and people waiting for a refresh to its

highest-selling electric vehicle Model Y.

The stumbling sales during the first quarter indicate that

the one-time leading brand is reeling from the fallout of the

company delaying launches for years, and Musk's foray into

politics in the United States and Europe.

Tesla shares were down early on Wednesday but reversed

course after a Politico report that Musk was planning to step

down from his role as an adviser to U.S. President Donald Trump

soon, as administration insiders increasingly view the

billionaire as a political liability.

But the White House dismissed the report, saying the tech

billionaire will stay on to complete his mission to slash

government spending and downsize the federal workforce.

"Shareholders are hoping Musk will now have the time to

focus on rebuilding the Tesla brand," said Stock Trader Network

Chief Strategist Dennis Dick, who has a position in Tesla,

referring to the Politico report.

Following Trump's steeper-than-expected tariffs against U.S.

trading partners, Tesla shares fell more than 7% in after-market

trading. While Tesla will be less affected than rivals, Tesla

imports parts and Musk has said the cost impact from tariffs

will not be trivial.

Musk's role in spearheading federal cost-cutting in the

United States and support of far-right parties in Germany and

other nations have produced a sharp response around the world.

Protests against Musk outside Tesla showrooms have spiked,

and the EV maker's cars and charging stations globally have

become targets for vandalism. Some Tesla owners have been

looking to disassociate themselves from Musk and data has shown

many are trading in their vehicles.

On Tuesday, a left-leaning judge won a seat on the state of

Wisconsin's highest court even after Musk spent more than $20

million backing her opponent in the race that led to protests

from residents declaring that democracy was "not for sale."

Tesla posted weak first-quarter sales in numerous European

markets and in China, even as consumers continued to opt for

EVs.

In the January-March period, the company globally

recorded a bigger-than-expected drop in sales to 336,681

vehicles, down from 386,810 units a year ago.

The expectation was for a 3.7% drop to 372,410 vehicles

delivered, according to an average estimate of 15 analysts from

Visible Alpha - but in recent days analysts had braced for even

worse figures, following Tesla's first-ever annual sales decline

in 2024.

"The brand crisis issues are clearly having a negative

impact on Tesla ... there is no debate," long-time Tesla bull

Dan Ives, an analyst at Wedbush Securities, said in a note,

adding the delivery numbers "were a disaster."

The company has lost about 45% of its value since

mid-December. That follows a record high after Trump's election

win when investors expected Musk's close ties to the White House

to ease regulatory pressure over its self-driving taxi program.

MODEL Y REFRESH

Last year, Musk forecast 20% to 30% sales growth in 2025,

promising to launch an affordable vehicle in the first half of

the year and banking on demand for its newest vehicle, the

Cybertruck.

While little is known about the progress on rolling out the

cheaper vehicle, demand for the pricey Cybertruck - with its

polarizing design and quality concerns - has been weak.

Musk did not reiterate the growth forecast on the

January earnings call, but said Tesla would return to growth

this year. Tesla is set to report first-quarter earnings on

April 22.

Tesla began offering the refreshed Model Y SUV with a

new look and updated features in China in late February and in

the U.S. and Europe last month. Investors are waiting to see if

demand for the model can counter competition from Chinese rivals

including BYD .

Tesla said on Wednesday that retooling production lines for

the refresh across all four of its factories led to the loss of

several weeks of production during the first quarter.

After enjoying a leading position among EV makers for years,

Tesla is set to be unseated by BYD for the first time this year

with a 15.7% market share, ahead of Tesla's 15.3%, according to

Counterpoint Research.

"I'm skeptical about demand for the new Model Y from a

couple of perspectives, even though there's still a fair amount

of growth for electric vehicles, the market is slowing down,"

said Thomas Martin, senior portfolio manager at Tesla investor

Globalt Investments.

Tesla's sales in key European markets fell again in March,

with numbers dropping for a third straight month in France and

Sweden.