Currently, Tesla is in a very bad situation.

On Monday, the world's largest electric vehicle manufacturer informed employees that the company would lay off more than 10% of its employees. Meanwhile, two other executives announced that they would voluntarily resign.

Earlier this month, Tesla also announced an astonishing decline in car sales. In the first quarter, Tesla delivered 387,000 vehicles worldwide, a year-on-year decrease of 8.5%.

This year, Tesla's stock price has fallen by more than 35%, of which it fell 5.5% on Monday. Strangely enough, Tesla CEO Elon Musk seemed indifferent to the company's mistakes and instead focused on other pursuits.

Tesla is still the largest electric vehicle manufacturer, and has almost single-handedly created the electric vehicle industry. As Tesla grew, so did the automotive industry. But now, in a very short period of time, the electric vehicle industry seems to have been freed from Tesla's yoke.

Automakers in the US, South Korea, China, and Europe all have large, sustainable electric vehicle product lines, and sales are growing. In the first quarter of this year, Ford sold 2,023 electric vehicles, an increase of 86% over the previous year, making it the second-best-selling electric vehicle brand in the US.

BMW said that in the first three months of this year, the company delivered 82,700 pure electric vehicles worldwide, a significant increase over the previous year. In China, Tesla is losing its advantage over its Chinese rivals.

Overall sales of electric vehicles have declined somewhat in recent months. However, analysts expect long-term sales to continue to rise. After all, phasing out gasoline cars is an effective and relatively easy way to reduce global warming emissions. Policy developments around the world are also almost certain, and most major car manufacturers will go all out to develop electric vehicles over the next few years.

Pete Slowik of the International Clean Transportation Commission (ICCT) said, “The challenges facing any company, Tesla or others, don't mean the entire electric vehicle industry is bad and bleak. Currently, this trend shift is real, and we have tremendous momentum from every global car manufacturer.”

Tesla's dilemma

Tesla is the first car manufacturer to prove that there is a market for electric cars. This helped it become the most valuable car company in the world and prompted traditional car manufacturers to enter the electric vehicle market. Recently, however, Tesla has been slow to innovate.

It hasn't launched a new car in years. According to reports, in the face of increasing competition, Tesla has canceled plans to launch a low-cost model. CyberTruck's launch was accompanied by many issues, and the long-promised model of fully autonomous driving is still far away. Meanwhile, the company's CEO Musk is also the CEO of space exploration technology company SpaceX and the owner of the social media platform X. His “polarizing” behavior alienates many consumers.

Currently, Tesla accounts for 51% of electric vehicle sales in the US, down from 65% less than two years ago. A number of factors contributed to Tesla's downturn, but the root of the trouble was the capricious Musk.

Musk is an erratic entrepreneur. Today, he is avoiding the traditional automaker strategy of gradually upgrading every year and introducing several new models every ten years. Instead, he's betting on major innovations, including CyberTruck and autonomous driving modes, to revive Tesla.

According to a source familiar with Tesla's internal situation, “Today, Musk seems only interested in landing on Mars. He seemed fed up with the idea of launching an upgraded Model 3.”

This strategy probably stems from Musk's ambition to conquer the world. However, in the automotive industry, this is not a successful model, as the automotive industry is driven by gradual updates and the regular introduction of new models.

Tesla has yet to comment on this.

If you don't innovate, you'll fall behind

Recent policy changes are almost certain that the electric vehicle market will continue to grow. Last month, the Biden administration finalized regulations requiring at least 54% of new cars sold in the US to be electric by 2030, and 67% by 2032. Today, electric cars account for only 7.6% of new car sales in the US.

In Europe, China, and some other countries, governments have also introduced policies aimed at stimulating the adoption and production of electric vehicles.

More importantly, electric cars will get better soon. The battery is expected to be lighter and more powerful, the range will improve, and the price may drop.

These advancements will make it easier than ever for some new companies to gain market share, especially if Tesla isn't keeping up with the latest features or launching new models.

Of course, Tesla isn't going away anytime soon. It remains the largest seller of electric vehicles in the US, with a market capitalization 10 times that of Ford. Also, all major car manufacturers in North America have agreed to adopt Tesla's charging standards, and Tesla has no sign that it is slowing down the construction of chargers.

However, without a new round of innovation, whether it's a new model, longer range, new features, or a drastically reduced price, Tesla will face the risk of falling behind.