Customers delaying purchase ahead of Tesla’s Model Y refresh, known as the so-called Osborne Effect, may only be a small contributor to the automaker’s European sales collapse compared to the CEO’s fraying reputation. Over the past two years, the brand’s market share in Germany plummeted to just 3.7% last month versus 23% in January 2023.
Most people tend not to be familiar with the Osborne effect, a relatively obscure economic term recited almost ritualistically by Tesla shareholders in recent weeks and months. It describes the propensity for consumers to postpone the purchase of a big-ticket item when they learn that a new, more-improved version of the same product is slated to launch in the foreseeable future, such as the refreshed Model Y debuting in March.
No matter how dire the outlook for Tesla car sales may be, there hasn’t been a time when high-conviction investors do not blame poor volumes on this phenomenon. It also deflects blame from the brand’s totemic CEO amid his endorsement of the far-right in Germany.
They will have to hope they are spot on, because Musk’s business is in a nosedive in Europe, traditionally friendly toward EVs due to steep fuel prices on the continent. The data offers valuable insight, since—unlike the U.S.—it is one of the few major markets that regularly reports detailed Tesla sales every month.
“Tesla has been a big loser of share in January, despite strong positive (battery electric vehicle) growth,” UBS analysts warned on Thursday.
The biggest concern is likely Germany, where Tesla is underperforming in what appears to be a growing market. Sales last month plummeted a staggering 60% year-on-year despite a 53% increase in the overall EV market. Its market share has dwindled from 23% two years ago to a paltry 4%.
This comes on top of earlier indications from other large European EV markets like Norway, Sweden and France, where demand plummeted by 38%, 44% and 63%, respectively.
Unfortunately, there is no similar data for the U.S., where light vehicle sales traditionally are reported by franchised dealers rather than official authorities or manufacturers. Since Tesla does not use third-party retailers nor voluntarily report regional car sales, this leaves quarterly data from California the only real proxy for Tesla demand in the U.S. market.
Many are pinning this unprecedented collapse on his very vocal and demonstrative support for the AfD, an anti-immigrant party that has been linked to neo-Nazis, and his recent salute that was criticized as mimicking European fascists.
When a popular European EV motoring program reviewed the upcoming Model Y, comments were full of references to Hitler’s Germany and the Blitzkrieg, with Teslas mocked as “Swasticars” that veer to the far right or can drive from Berlin to Warsaw on one charge. The trend has continued across social media.
Due to the dripfeed of sales figures across the European market, including EV-friendly countries outside the EU such as the UK, Norway, and Switzerland, investors won’t have full clarity until February 25th. That’s when Europe’s automaker lobby group, ACEA, will publish detailed results for all 31 markets.
These declines undoubtedly can be blamed in part on the news announced in mid-January that the refresh of its most important vehicle, the Model Y, is just weeks away. Some of Tesla’s more devoted early adopters are likely waiting for delivery in March, hoping to be among the first to own a limited-edition Launch Series.
“It’s not well understood how much the Osbourne Effect hurt Tesla last year. There were many, many people holding off on Tesla purchases,” wrote Halter Ferguson financial chief investment strategist at Bradford Ferguson on Thursday in reference to concerns over Tesla’s ailing car business.
The question is how much that was factor versus the other potential culprit—“Tesla shame” stemming from its increasingly divisive CEO Musk.
The negative publicity surrounding Musk is more costly in an environment where domestic European brands offer a wide variety of EV models not available in the U.S., such as the popular Skoda Enyaq crossover. When there are so many alternatives from which to choose, even the slightest cause may be a reason for a brand to not being considered during a purchase.
One indication that may shed light on the Osborne effect comes from the UK, a country where Musk’s far-right politics are more widely embraced.
There, he enjoys nearly as much support as in the U.S. thanks to the widespread popularity of his favored Reform Party led by Trump ally Nigel Farage, which leads both Labour and the center-right Conservatives.
Indeed, Tesla’s volumes in the UK dropped by a comparatively minor 7.8% in the month amid a 41% increase in EV sales.
This suggests Musk’s politics may be playing a driving role behind the far steeper declines on the continent, a region whose fascist past in countries like Germany still leaves scars decades later. The company did not respond to a Fortune request for comment.
Either way, the new Model Y and a new entry model still as yet unseen cannot come soon enough.
