In the News Teaching Activity – why are Tesla sales in Europe declining? (Mar 2025)

Tesla’s year-on-year European sales plunged 45% in January despite a growing EV market.

The sharp decline in Tesla sales comes amid production changes, increased competition, especially from China’s SAIC Motor and CEO Elon Musk’s controversial political involvement. The decline in Europe reflects shifting market dynamics driven by demand and supply forces. On the demand side, consumer preferences are evolving as affordability and variety improve with Chinese automakers offering competitively priced EVs. Additionally, Elon Musk’s increasingly political role in the USA may also be damaging the Tesla brand in Europe. Supply-side factors also play a role, with Tesla’s temporary production slowdown in Berlin affecting deliveries. Meanwhile, China’s SAIC Motor has capitalised on strong production capabilities and strategic pricing, increasing its market share.

Tesla sales almost halved in Europe last month and were surpassed by a Chinese rival

1. Using information from the article, explain why the demand for Teslas in Europe has fallen by 45% over the past year.

2. Assess the supply-side factors that may also be having an impact on the market for EVs in Europe.

3. Using a demand and supply diagram, explain the likely impact of the changing demand and supply conditions in the EV market on the price and quantity of Teslas in Europe.