Tesla in Freefall: The Company That Redefined Mobility Now Fights to Survive

Tesla, the company that turned electric vehicles into a status symbol now faces an uncertain future. Its global dominance is slipping, sales are plummeting, and its founder, Elon Musk, has become a polarizing figure.

As the company sacrifices profitability in a desperate attempt to sustain demand, its expansion into Mexico has hit a wall of corruption, legal battles, and an energy crisis. What was once a story of innovation and growth is now a cautionary tale about the risks of relying on an advantage that is no longer exclusive. Cause Tesla isn't running alone in the race it helped create. And time is running out.

Elon Musk, Tesla's founder, has become a source of uncertainty for his company. Photo: SiiLA.

By: SiiLA News

03/14/2025

Tesla is in trouble. Declining sales, a plunging stock price, intensifying global competition, and political controversies surrounding its founder, Elon Musk, have pushed the company to a critical juncture. The once-dominant force in the automotive industry now faces challenges on all fronts.

In the United States, Tesla's vehicle demand fell 2% in the first two months of this year, and between January 2 and March 12, its shares plummeted 34% on the NASDAQ, wiping out billions in market value. However, the most visible blow is elsewhere: Tesla vehicles and charging stations have been vandalized in protests against Musk's alliance with Trump. This connection has turned him into a symbol of a politically divisive agenda.

Meanwhile, in Europe, Tesla's sales and registrations have been slashed in half, hitting key markets like Germany, France, and Italy. Its brand image has deteriorated amid political disputes and fierce competition from Volkswagen and Renault. In China, its most significant growth driver, deliveries crashed 49% in February alone, as domestic manufacturers like BYD solidified their dominance with more accessible and advanced technologies. And in Mexico, a lawsuit over alleged fraud and corruption has jeopardized its Latin American expansion.

Behind all this lies a series of decisions that have weakened a company crucial to the global industrial real estate market, considering its manufacturing infrastructure spans three continents, covering approximately 2.8 million square meters—an area equivalent to 88% of Mexicali's industrial inventory, according to SiiLA data.

In its latest 2024 financial report, Tesla acknowledged slowing growth. Revenue increased by just 2%, the weakest expansion in years. Production dropped 7%, and its operating margin fell to 6.2%, one of its lowest levels on record.

To counteract this slowdown, Tesla aggressively slashed prices to sustain demand—at the cost of profitability. While the average production cost per vehicle fell to $35,000—its lowest level ever, aided by cheaper materials, greater efficiency, and supply chain optimizations—the decline in vehicle prices far outpaced cost reductions, eroding margins even further.

The dilemma is clear: if Tesla continues lowering prices, profitability will keep shrinking; if it holds prices steady, it risks losing even more market share. But the problem extends beyond pricing.

The company's operating costs continue to rise, driven by heavy investments in autonomous driving technology and manufacturing expansion. Tesla is spending more, earning less, and facing a competitive landscape where brand recognition alone is no longer enough to sell electric cars. Production setbacks have also compounded the crisis, with Cybertruck scaling slower than expected and the Berlin Gigafactory still underperforming its projected output.

Adding to its woes, Tesla is now dealing with an external blow: the reduction of government subsidies for EVs in key markets, which has weakened demand and directly impacted its business model.

Tesla and the Industrial Real Estate Market: From Growth Catalyst to Uncertainty

Tesla faces growing competition from automakers like BYD, Daimler AG, Ford, General Motors, Hyundai, NIO, Nissan, and Rivian. Photo: BigStock.

When Tesla announced its Gigafactory project in Nuevo León, Mexico, in March 2023, the industrial market reacted instantly. Monterrey's rental prices and land values skyrocketed, fueled by what became known as the "Tesla effect." With rising industrial space demand and inventory running low, expectations for Tesla's arrival intensified pressure on Mexico's key industrial hubs.

But nearly two years later, the outlook is starkly different. Tesla's arrival in Mexico is uncertain—hindered by power grid saturation, a lack of renewable energy infrastructure, and growing trade tensions between Mexico and the United States. Complicating matters further, the company's planned factory site has become mired in legal disputes.

The land earmarked for Tesla's plant is caught in a long-standing legal battle, with accusations of fraud and corruption in property registration records. Families claiming ownership have challenged the sale, alleging that the transaction involved irregular documentation. The case has exposed deep flaws in Nuevo León's land registry system and raised concerns about the legal security of large-scale regional investments.

The problem goes beyond Tesla. Uncertainty surrounding the Nuevo León plant has stalled billions of investments in the EV supply chain. Tesla's expansion was expected to trigger $15 billion in supplier investments, yet several companies have likely postponed or adjusted their plans due to the project's delays.

This disruption comes when the automotive sector remains a cornerstone of Mexico's economy, contributing an average of 4.3% to the national GDP over the past decade. Likewise, the industry accounts for a quarter of the country's industrial gross leasable area, according to data from INEGI and SiiLA.

Within this ecosystem, two out of every ten industrial tenants are linked to vehicle and auto parts manufacturing, reinforcing the industry's outsized influence on logistics and manufacturing space demand.

Had Tesla's Nuevo León plant materialized in 2024, its impact on Mexico's industrial real estate market would have been undeniable. The Gigafactory was projected to occupy at least 324,000 square meters, which would have doubled the sector's growth in the region—pushing industrial expansion up by 35% in a single year, one of the highest surges on record.

Conversely, while Tesla's stalled investment in Mexico is entangled in legal disputes and energy supply concerns, the company is racing against time to salvage its global operations. In 2025, Tesla plans to launch lower-cost models to reignite demand and double down on self-driving technology as a new revenue stream.

Tesla is no longer the only player in the electric vehicle race. Its technological edge has shrunk, and its market dominance is no longer guaranteed. The true challenge is not whether Tesla can recover—but whether it still has the runway to do so before being overtaken in the very industry it pioneered.

For insights on commercial real estate and industrial market trends, visit SiiLA REsource or contact us at contacto@siila.com.mx.

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