Tesla's Australia sales soar in May — a bright spot amid struggles elsewhere

Tesla may be facing declining sales in the U.S. and Europe, but it reported a bright spot in Australia — where its electric vehicle sales rebounded to their highest level in nearly 12 months in May.

The American EV maker said Tuesday that its vehicle sales jumped to 3,897, primarily driven by record sales of its recently revamped Model Y compact sport utility vehicle.

Australian sales of the Model Y soared 122.5% year over year, while sales of the company's Model 3 dropped significantly.

Total deliveries in Australia were up just 9.3% year over year but surged over 675% from April when the company sold only 500 EVs, according to data from the Australian Electric Vehicle Council.

The EV Council is the exclusive source of Tesla and Polestar sales data in Australia after the brands exited the Federal Chamber of Automotive Industries (FCAI) last year.

Tesla's April sales numbers for Australia had been the company's worst performance of the year there. Despite the May rebound, the EV makers' total sales in Australia remains down 48.2% year-to-date compared with the same period last year.

"Tesla's strong sales growth in Australia this May is an encouraging sign, driven almost entirely by strong demand for the updated Model Y. But globally, Tesla is still facing headwinds," Liz Lee, associate director at technology market research firm Counterpoint Research, told CNBC.

According to Counterpoint EV Sales Tracker, she added, Tesla's sales were down 13% year on year in the first quarter. "Thus, while the latest Australian rebound is meaningful locally, it does not yet signal a broader global recovery."

Tesla's global sales have suffered in recent months in light of increased competition and reputational damage related to CEO Elon Musk's political rhetoric and activities.

For example, prior to May, Tesla's Australia sales struggled amid reports of vandalism and protests related to Musk's work with U.S. President Donald Trump's administration and support for far-right parties in Europe.

Tesla reported on Tuesday that its sales in the U.S. were down 11% in May from last year. And European industry groups on Monday noted significantly lower sales for new Tesla vehicles in Spain, Portugal, Denmark and Sweden last month.

But there have been some bright spots. Tesla posted a surprise bounce back in Norway, where the Model Y helped it post 213% more vehicles in May from a year ago. Tesla also said it hit a record breaking 1,545 sales in Turkey last month.

That data comes after Trump hosted a press conference last week, where he announced that Elon Musk would be officially departing from his role within the federal government and White House.

Though Trump added that Musk will stay on as an advisor, in a research note following the announcement, Wedbush's Dan Ives said he believed that Musk's days in politics are essentially over after the brand damage suffered by Tesla.

The Tesla bull said Musk's pivot back to the EV maker "was the best possible news Tesla investors could have heard," with the rollout of its robotaxi launch expected later this month. Musk has said that Tesla has already been testing driverless Model Ys.

Musk's return comes at a time when Tesla is also facing much tighter competition, especially from Chinese EV makers.

BYD, for example, has been expanding globally in the face of tight competition in its home market of China, and is increasingly going head to head with Tesla.

In April, China's BYD outsold Tesla in Europe for the first time, according to JATO Dynamics. The automotive giant recently announced a slew of discounts, and other Chinese automakers are following suit. In March, it was revealed that Tesla fell behind BYD in total annual sales revenue.

And according to a report from JATO Dynamics, BYD sold more pure battery EVs in Europe than Tesla for the first time ever last month in what it called a "watershed moment."

In May, however, Tesla was able to regain a lead against BYD in vehicle sales in Australia, with 3,897 sales compared with BYD's 3,225, based on available data.

Its worth noting that Tesla exclusively sells battery electric vehicles, while BYD also sells hybrid cars. Battery EVs run entirely on electricity, while hybrid vehicles combine an electric battery with an internal combustion engine.

According to data that Australia's FCAI sent to CNBC, sales of hybrid vehicles and plug-in hybrid electric vehicles — a type of hybrid that can be charged by being plugged into an external power source — rose by about 6% and 118%, respectively, year on year in May.

"Recent sales data indicate that consumers are increasingly turning to hybrid and plug-in hybrids as many Australians want to reduce their vehicle emissions," said Tony Weber, chief executive of the FCAI.

He added that hybrids come without the range limitations associated with battery EVs, which is a particular concern in Australia.

Amid increasing global competition and threats from hybrid vehicles, Counterpoint's Lee said, Tesla should continue to look to high-potential regions like India, Southeast Asia and parts of Latin America.

"These markets are ramping up EV infrastructure and incentives, and Tesla could benefit by moving early, especially if it localizes production and tailors offerings to local preferences," she said.

Tesla announced on Tuesday that it is leasing a warehouse in Mumbai that is expected to be used for vehicle servicing as part of the company's long-anticipated India expansion.

Tesla was up about 0.5% in trading on Tuesday and is down about 15% year-to-date.