Has Elon Musk left Tesla in bad odour?

Tesla's UK sales plummeted 45% in May, positioning it competitively with BMW and Volkswagen in the electric vehicle market, with VW leading when its brands are combined. This decline prompts Tesla to offer explanations for its underperformance, citing Model Y production challenges at Giga Berlin, while external narratives attribute it to CEO Elon Musk's controversial public image. Meanwhile, DiscoverIE shares surged 15% following results, reflecting a 50% increase in two months, driven by its flexible manufacturing model and focus on industrial automation and data centers.

Analysis

Tesla's UK sales experienced a significant contraction, falling 45% in May, which has brought its market share in the electric vehicle (EV) sector to a level comparable with all-electric models from BMW and Volkswagen. Notably, Volkswagen, including its stable of brands like Audi and Skoda, now leads as the pre-eminent seller of EVs in Britain. This downturn has led Tesla to publicly address its UK performance, attributing the decline to challenges with the next-generation Model Y upgrade and production ramp-up issues at its Giga Berlin facility. However, an alternative narrative gaining traction suggests that CEO Elon Musk's public persona is negatively impacting consumer adoption. The forthcoming June sales figures for the new Model Y will be critical in determining the persistence of this trend. In contrast, DiscoverIE, a FTSE 250 mid-cap technology company, demonstrated strong performance with its shares surging 15% post-results, marking a 50% increase over the past two months. This rally is attributed to its resilient business model, characterized by flexible manufacturing that supports margin growth even with stagnant sales, and its strategic focus on supplying electronic and sensor components to high-growth markets such as industrial automation, data centres, and security. The market had previously underestimated DiscoverIE's ability to navigate US trade wars, given its 25% US business exposure. The broader UK EV market saw all-electric cars account for approximately 22% of new registrations in May, largely driven by fleet manager decisions, indicating that 78% of buyers are still opting for non-electric vehicles, highlighting ongoing challenges to wider consumer adoption.

Key Decisions for Investors

• Investors should closely monitor Tesla's June UK sales figures to ascertain if the May decline and production issues are transient or indicative of a more sustained loss of market share and impact from CEO sentiment.
• The strong performance and market re-evaluation of DiscoverIE highlight potential undervaluation in specialized industrial technology firms with resilient business models; however, the rapid 50% share price increase in two months warrants caution regarding entry points.
• Consider the broader EV market dynamics, where despite growing EV registrations primarily through fleet sales, the significant majority of UK car buyers (78% in May) are still not purchasing EVs, suggesting potential headwinds for aggressive EV adoption forecasts.