The interesting thing is, Tesla is perhaps the most obvious and extreme example, but they’re not the only auto manufacturer this is happening to right now. Nissan is in a bit of a tail spin as well.
There are so many problems slamming in to the auto industry right now. Even beyond the tariff instability.
In the US in particular, As cars have gotten more reliable and longer lasting, the market for new “budget” cars has dried up. Car buyers who might have once bought budget are now buying used cars that probably have a good many years left. The sales of new cars have been declining since 2016 but new car price have been skyrocketing, keeping up revenue growth for automakers.
This seemed ideal for automakers as it meant they could drop the lean margins of cheap cars and focus on higher margin markets, which looked much better to shareholders. Those companies that focused on this budget market have suffered, the best example being Nissan. The ideal for automakers is that people will buy “up” the value chain over time, buying higher end or “less used” vehicles when they trade in their old vehicle, going from a twice used, to a once used and eventually to a new car.
This kind of came to a head during the pandemic. Not only was the supply of lower end used vehicles dwindling as less and less entered the market due to less being made a few years back, there was also a shortage of new cars due to supply chain break downs and an increase in demand. Many people were taking out insane financing on massively over priced cars, both new and used. Now a lot of people are underwater on those auto loans from the pandemic because the trade-in/sales price is less way than what they have left on the loan. Many are also defaulting on those insane pandemic auto loans and their repossessed cars are ending up back on the market, increasing supply in the used market.
Many who are underwater on their auto loans but can still make payments can’t afford to make even larger payments, so rolling over the principle from the last loan into a new loan on another car is impractical. So they aren’t buying, let alone moving up the market to buy new or higher end. The demand being suppressed in the used market and the supply being bolstered by repos means used prices are massively depressed. This depressed used market carries over to the new market in turn, as most people buying new probably couldn’t afford to do so without trading in their old car, so a depressed used market hurts their purchasing power. Why would someone buy a new car when the only new one the could afford is probably worse than the existing car.
Tesla is getting a lot of focus because of the political entanglement of their high profile CEO, but the whole industry is under strain. Nissan is frantically looking for buyers to help them out of the debt hole they’re in, and groups like Stellantis (owners of Chrysler, Fiat, Jeep, Ram and Dodge) are desperately chasing new revenue streams as absurd as ads in the central console.