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By Abhirup Roy and Akash Sriram
(Reuters) -CEO Elon Musk pledged Tesla would return to growth this year after the company posted its first-ever sales decline in 2024. But the odds look stacked against him.
Relentless protests in many countries against the billionaire's involvement in U.S. President Donald Trump's administration and far-right politics in Europe have tarnished the image of the once-leading electric vehicle brand. That was a key factor behind Tesla posting a 13% drop in quarterly deliveries on Wednesday, the weakest in nearly three years.
Now, investors and analysts are bracing for a fall in Tesla sales again this year.
"This is our first look at the impact of recent brand damage - and it appears to be the primary driver behind this quarter's delivery decline," Gene Munster, managing partner at Deepwater Asset Management, said on X. "These growth rates will likely deteriorate further this quarter."
Munster estimates 2025 deliveries will be 9% below the 1.79 million Tesla reported last year.
It is not all down to politics. Fans have long bemoaned the automaker's aging lineup even as rivals including BYD in China - where competition is especially tough - have introduced EVs that compete with the popular Tesla Model Y SUV. In Europe too, Tesla is losing ground.
The company did refresh the Model Y, with deliveries starting in China in late February, and investors are watching whether that makes a difference to sales in the coming quarters.
Still, Deutsche Bank analysts expect a 5% sales drop this year, assuming a staggered rollout of Tesla's anticipated cheaper car. Tesla is expected to prioritize delivery volumes at the cost of margins again this year with more incentives and lucrative financial deals, they said.
Tesla has not announced when a cheaper model will be launched and at what price.
Gary Black, managing partner of Tesla shareholder The Future Fund, expects the company's 2025 delivery and profit "will go much lower" if the cheaper vehicle is simply a barebones version of an existing model instead of a new product that appeals to more customers.
Barclays analysts said the first-quarter delivery number "sets a challenging path for even flat year on year volume in 2025."
Last year, Musk had promised 20% to 30% volume growth in 2025. He did not reiterate this in January, saying instead, Tesla was "working hard" to grow its annual volumes.
On Wednesday, Tesla said retooling production lines for the refreshed Model Y across all four of its factories led to the loss of several weeks of production during the first quarter.