Last August, Tesla only accounted for 38% of the electric vehicle market share in the US – the lowest level since 2017. Meanwhile, competitors such as Hyundai, Kia, Toyota and Honda are accelerating strongly thanks to attractive incentive packages, causing Tesla to lose steam right on its “home field”.

Tesla’s electric vehicle market share has fallen below 40% for the first time since October 2017, according to data from Cox Automotive. It’s a clear sign that Elon Musk’s automaker is losing its dominance as consumers have more options.

The main reason is that rival car manufacturers have launched many EV models with strong incentives, helping sales of some brands increase by up to 120% in July alone. Meanwhile, Tesla lacks new products that are attractive enough to retain customers.

What is Tesla missing to stay ahead?

“When you’re an automaker and you’re not launching new products, your market share is going to decline,” said Cox analyst Stephanie Valdez Streaty. Tesla is trying to build its image as a robotics and AI company, but in reality, its lack of product innovation is costing it.

Tesla’s last major launch was the Cybertruck in 2023, but it hasn’t achieved the same level of popularity as the Model 3 sedan or Model Y SUV. Even this year’s Model Y upgrade has been criticized for falling short of expectations.

How are Tesla’s competitors taking advantage of the opportunity?

While Tesla has stalled, other automakers have used both sales incentives and tax incentives to boost sales. The incentives, combined with the federal electric vehicle tax credit set to expire at the end of September, have given the entire US EV market a boost.

As a result, electric vehicle sales in the US in August increased 14% compared to the same period last year, but Tesla’s growth was only 3.1%. This shows that the company’s growth is much slower than the industry’s overall pace and the risk of falling behind is increasingly evident.

What is the future for Tesla when market share is eroding?

Tesla once held 80% of the US electric vehicle market, but that dominance is now a thing of the past. A lack of new products, growing competition, and changing market trends are putting Tesla in a difficult position: innovate aggressively or lose its leadership position.

If it does not come up with a new strategy soon, especially as Asian competitors accelerate, Tesla risks becoming just “one of many electric car companies” instead of the market leader.