Will Tesla Become the Blackberry of Electric Vehicles?

After disrupting the automobile industry with its innovative and enviable electric vehicles when it unveiled its first car in 2008, Tesla now finds itself quickly losing market share – and maybe its allure. In Europe, for example, sales of Elon Musk’s EVs have dropped by a third so far this year, and in July, Chinese EV manufacturer BYD sold more vehicles than Tesla in Europe.

Professor Mike Lenox.

Tesla’s global sales fell 13.5% in the second quarter of this year, compared to the same period in 2024. Last year was the first full year Tesla sales declined in a decade.

University of Virginia Darden School of Business professor Michael Lenox says the EV industry is in a classic “shakeout” phase as new competitors finally catch up with – and sometimes surpass – the original disruptive innovators.

The Darden Report caught up with Mike Lenox, a national expert in disruptive technology and the electric vehicle industry, to learn more.

Has Tesla squandered its early market advantage among EV manufacturers?

Yes. Tesla was an EV pioneer who launched two of the most popular cars in the world, the Model 3 and the Model Y. The Model Y has been the most popular car in the world – among electric vehicles and internal combustion engines. Since the release of the Model Y in 2020, Tesla has released the Cybertruck, which always seemed destined to be a novelty at best. They simply have not capitalized on their early lead by offering an expanding portfolio of vehicles like every other major car manufacturer offers. This has allowed a variety of other players from BMW to GM to Rivian to grab EV market share in the US and abroad.

What’s behind its declines and struggles in terms of automobile design and production?

While it is difficult to say, we can speculate why Tesla has been slow to offer new vehicles. From the Robotaxi to humanoid robots, Tesla has been investing much of its time and energy into other businesses. Elon Musk is serving as the CEO of multiple companies while moonlighting in the Trump administration until recently. They seem to have lost interest and focus on their core automotive business. They, of course, could turn this around, but I am waiting to see announcements of forthcoming new vehicles and not just updates to existing models as they recently have done with the Model Y.

Did Musk’s time heading the Department of Government Efficiency (DOGE) hurt Tesla?

Yes, the reduction of demand for Teslas, especially in Europe and the US, has been significant. To be clear, this does not appear to be a reduction in demand for EVs. Consumers are simply buying EVs from competitors. Many Tesla owners have sold their cars to purchase other non-Tesla EVs. The evidence is obvious that Musk’s time with DOGE created a significant backlash among many of the customers core to Tesla’s consumer base. This has caused a significant decline in their prospects at the same time that competition has been increasing.

Why, by contrast, is Chinese EV manufacturer BYD doing so much better?

When we have technology transitions as we are seeing with EVs, we often see numerous entrepreneurial entrants and diversifying incumbents entering the market with the new technology. It is not surprising to see others such as BYD entering and succeeding in the market. What makes BYD particularly competitive is that they are vertically integrated in the battery stack. While much of this is a direct result of Chinese state policy to subsidize and invest in batteries and EVs, the fact is that BYD is seemingly producing EVs at a fraction the cost of others. They have run down the learning curve by producing their own batteries. They have also been aggressive in expanding their portfolio of vehicles offering everything from inexpensive entry vehicles to high-end luxury models. This has allowed them to capture economies of scale further driving down their costs of production.

How does all this fit into established patterns of disruptive technologies?

One of the classic features of disruption is the shakeout. As new technologies gain traction, we see significant entry from new start-ups and diversifying incumbents. This creates an incredibly competitive environment that typically leads to the exit of companies who struggle in the evolving market. A lot of attention is paid to the incumbents who fail – the Blockbusters and the Kodaks – but the fact is there are often high-flying start-ups that ultimately fall short. Rio was the pioneer in digital music players. Blackberry was a pioneer in smartphones. Both were disrupted by Apple – by the iPod and iPhone, respectively. Apple was arguably a late entrant into both sectors but was able to redefine the core architecture of the new technology with their innovative designs. There is a risk that Tesla will be the Blackberry of electric vehicles.

Can Tesla get back on track?

Yes, I believe so. Successfully scaling an automotive company, as Tesla has, is a major accomplishment. Many of the traditional automakers are still only partially committing to EVs. This will likely hurt them in the long run. I suspect some of the legacy automakers will eventually go away (either through acquisitions or bankruptcy). So, Tesla has time to turn things around. They would benefit from rediscovering their creative energy and launching a broad, diverse portfolio of vehicles that serve multiple market segments. They should also continue to invest in battery innovations. The Chinese currently dominate the upstream supply chain for batteries. To compete with the likes of BYD will require some focus on how to drive costs down on the batteries. A revolutionary new battery architecture, perhaps solid-state batteries, may allow them to leapfrog the likes of BYD.