Can Tesla stage a comeback in Israel in 2025?

Last week, Tesla launched the new generation of its Model Y, its best-selling model, in Israel. Two or three years ago, such an event would have been the talk of the car import market, but now it passed almost under the radar. The main reason is that Tesla now has dozens of rivals in its segment, and almost every month more models join the competition, mainly from China.

However, there is another reason, and that is the global “noise” surrounding Elon Musk’s political activities, which blur the boundaries between Tesla, the innovative electric car manufacturer, and Tesla as the business arm of Musk the politician and Trump’s right-hand man. This noise has already disconnected the company’s stock from its performance in the automotive market (down 18% in the past month), led China to threaten sanctions on Tesla in light of Trump’s tariff policy, and in recent weeks has brought protesters to the company’s showrooms in the US to protest the budget cuts being made by its CEO.

Tesla is also facing significant challenges in Israel, which, at least for now, are focused only on the vehicle market. Although Tesla ended 2024 with a 21% increase in deliveries to Israel compared with 2023, after a strong final quarter, its share of all deliveries in Israel’s electric vehicle market was 12.2% in 2024 compared with 57% in its first year on the market. The big question is whether Tesla will be able to regain its position, or will it continue to erode in the face of increasing competition.

Weak competitive position

Tesla begins 2025 from a problematic starting point in competitive terms, after a price spike in early January following the purchase tax increase. As a result, it is currently in a weaker competitive position than it was last year, with a price gap as much as tens of thousands of shekels above prices of some rivals.

When Tesla entered the Israeli market four years ago, it was almost the only player in the segment and took advantage of its position well. However, today, in its specific price segment (between NIS 200,000 and 300,000), there are about 14 rivals, most of them Chinese, who have been clearly targeting taking a bite out of Tesla’s market share. All of them have models that were designed from the beginning to compete directly with the Tesla Model 3 and/or Model Y.

To this can be added the openness of the Israeli public to unknown Chinese brands that offer value, and the discounted plug-in models from China that are eating into the entire electric vehicle segment.

This is a unique competitive situation for Tesla in the world, except perhaps in China itself, where the company is also currently losing market share to dozens of aggressive competitors. In 2024, Tesla managed to maintain its position in Israel by cutting prices, but clawing back market share will need more significant steps.

At the moment, it seems that two factors could bring Tesla’s sales out of the marketing stagnation in 2025 and allow it to increase its market share. The first is another deep price cut, which would bring prices closer to the level of its growing Chinese rivals. However, such decisions are not made at Tesla Israel but by global management, and at the moment it does not seem that Tesla worldwide is leaning in this direction. It is doubtful whether the tiny, tax-ridden Israeli market will cause it to change strategy.

The unrealized potential

The second factor could be Tesla Israel’s expansion into the fleet vehicle market, where its presence has been minimal until now. This is a huge potential market with nearly 80,000 purchases per year, which is far from being exhausted when it comes to purchasing electric vehicles. Furthermore, many of the recipients of company cars in Israel are tech company employees, who are the “core” of Tesla customers worldwide.

But even in this area, Tesla insists on playing by its own rules and not aligning with local rules. Such as, for example, the fact that leasing companies do not like, to put it mildly, importers who cut prices and in the process “drop” the scrap values of existing vehicles on their balance sheets.

Tesla has also refused to bow to the practice of granting leasing companies in Israel significant discounts from the official price list. In the past two years, it has operated a “fleet department,” which functions independently of large companies and has even managed to make it onto the employee vehicle selection lists of several of them. But still, traditional leasing companies are essential “gatekeepers” for many fleets in Israel. Will there be a breakthrough in this area in 2025? There are quite a few indications from the tech industry that this may indeed happen.

Published by Globes, Israel business news – en.globes.co.il – on February 26, 2025.

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