Who will pay for Musk’s growth dream?

Author 丨 Chen Sheng of Snow Leopard Financial Society

At the beginning of 2025, Tesla started a new year of competition with a global wave of price cuts. However, the reality of a rare year-on-year decline in deliveries throughout 2024 reveals the deep anxiety of the electric vehicle giant on the road to growth.

Although Musk proposed a target of 20% to 30% sales growth in 2025 at the earnings call, achieving this goal needs to overcome at least four obstacles: aging of main models, price wars that erode profits, global market differentiation, and autonomous driving commercialization problems.

In 2024, Tesla will deliver 1.789 million vehicles for the whole year, down 1.1% year-on-year, which is the first annual sales decline since 2015. Although it is only a small fluctuation, the hidden crisis behind it is difficult to ignore.

Model iteration is stagnant: The two main models, Model 3 and Model Y, were launched in 2016 and 2019 respectively, and consumer aesthetic fatigue led to weak demand.

Profit margin compression: Net profit in 2024 will be halved year-on-year, and the gross profit margin of the automobile business will drop sharply from 15.7% in 2023 to 7.3%.

The competitive landscape has changed dramatically: BYD is approaching Tesla with global sales of 1.77 million vehicles, and the encirclement and suppression of local China car companies has further squeezed Tesla’s market space.

Although Tesla has temporarily stabilized some sales through frequent price cuts (such as the Model Y price cut by more than 30,000 yuan in China market and the five-year zero-interest financial plan), the price-for-volume strategy may have peaked.

Musk pins his growth hopes on the new car cycle and autonomous driving technology breakthroughs in 2025, but whether this narrative can be paid for by the market still needs to be dismantled by region.

1)China: Hidden concerns behind new sales highs

In 2024, Tesla delivered 657,000 vehicles in the China market, a year-on-year increase of 8.8%, a record high. However, the value of this achievement deserves vigilance.

The price war risks overdrawing demand. Although the price reduction policy stimulates short-term sales, it also leads to the loss of brand premium. BYD, Geely, NIO and other car companies have seized the market of 200,000 to 300,000 yuan with lower prices and faster iteration speeds, and have intensively launched benchmarking Model Y models.

At the same time, Tesla’s Shanghai super factory localization rate has exceeded 95%, and there is limited room for cost compression. The launch of Model 2/Q still needs to face fierce competition in the 150,000-yuan market.

The growth potential of China’s auto market has gradually shifted from incremental expansion to stock game. If Tesla fails to achieve breakthroughs in intelligence (such as FSD localization) and cost performance (Model 2/Q), its share will be further eroded. risk.

2)United States: Double uncertainty in policies and needs

The United States is Tesla’s second-largest market, but its demand growth is also slowing. In the first three quarters of 2024, U.S. electric vehicle sales increased by only 7.2% year-on-year, much lower than the 47% in 2023. Mainstream consumers have still not eliminated their doubts about battery life and convenience of charging. At the policy level, Trump may cut subsidies for electric vehicles after returning to the White House.

However, Tesla’s narrative in the United States has shifted to technology-driven. FSD (fully autonomous driving) and Robotaxi (unmanned taxi) are seen by Musk as trillion-dollar opportunities, and their progress may be benefited by the loosening of regulations by the Trump administration.

If FSD V13 can pass the Austin pilot verification in June 2025, it may become a boost to the stock price, but technical maturity and regulatory risks are still hanging swords.

3)Europe: Subsidies recede and local brands counterattack

The performance of the European market in 2024 can be called Tesla’s Waterloo. Major countries such as Germany and France have cut subsidies for electric vehicles, and consumers have turned to hybrid models, putting pressure on Tesla’s deliveries. At the enterprise level, Volkswagen, BMW and other car companies are accelerating their electrification transformation and seizing the market with their design and channel advantages closer to European users.

Tesla’s response strategies in Europe include extending Model Y loan discounts and free overcharging services, but the effect is limited. In the future, the optimization of the Berlin plant’s production capacity and Cybertruck’s differentiated positioning may be key variables.

Musk’s 2025 growth path planned for Tesla includes two main lines: increased volume of low-cost models and commercialization of autonomous driving. However, both strategies face practical challenges.

Tesla plans to launch the Model 2/Q priced at around 140,000 yuan in the first half of 2025, with the goal of driving sales by sinking the market. Although the manufacturing cost of the Model 2/Q is 50% lower than that of the Model 3, local China brands already have a first-mover advantage in this price range and have extremely low profit margins.

Tesla has long shown its high-end image, and low-priced models may dilute brand value, which in turn affects sales of high-margin models. Once the Model 2/Q cannot achieve large-scale delivery before the end of 2025, Tesla’s growth goals will be extremely challenging.

On the other hand, the commercialization of FSD and Robotaxi is far away from the immediate thirst. Musk announced that FSD technology will undergo qualitative changes in 2025 and plans to promote the Robotaxi pilot.

But in fact, the market still has doubts about the maturity of FSD technology. Capital markets ‘optimistic expectations for autonomous driving (such as Wedbush raising its stock price target to $515) are based more on narrative rather than actual results.

Although FSD V13 ‘s performance has improved in testing, safety redundancy under complex road conditions has not yet been resolved, and the global regulatory approval progress is slow. In terms of business model, FSD subscription revenue only accounts for 1.6% of vehicle sales revenue, making it difficult to support valuation in the short term.

Finally, let’s go back to the question in the title of this article: Who will pay for Musk’s growth dream?

Consumers may be tempted to buy new cars by low prices, but brand loyalty may be weakened by price fluctuations; investors may be able to accept high valuation bubbles and bet on the long-term dividends of autonomous driving, but subject to the risk of short-term performance fluctuations; Supply chain partners may be able to obtain orders by deeply binding Tesla, but they also need to deal with its underpricing strategies.

Tesla’s 2025 growth target is a small bet that will be a combination of technological breakthroughs and market patience.