Tesla sales tumble as competition heats up and demand for EVs slows

Tesla sales fell sharply last quarter as competition increased worldwide, electric vehicle sales growth slowed, and price cuts failed to lure more buyers.

The Austin, Texas-based company said Tuesday that it delivered 386,810 vehicles worldwide from January through March, almost 9 per cent below the 423,000 it sold in the same quarter of last year.

Sales also fell short of even the most bearish Wall Street expectations. Auto industry analysts polled by FactSet were looking for 457,000 vehicles deliveries from Tesla Inc. That’s a shortfall of more than 15 per cent.

The company blamed the decline in part on phasing in an updated version of the Model 3 sedan at its Fremont, California factory, plant shutdowns due to shipping diversions in the Red Sea, and an arson attack that knocked out power to its German factory.

In its letter to investors in January, Tesla predicted “notably lower” sales growth this year. The letter said Tesla is between two big growth waves, one from global expansion of the Models 3 and Y, and a second coming from the Model 2, a new, smaller and less expensive vehicle with an unknown release date.

“This was an unmitigated disaster 1Q that is hard to explain away,” wrote Dan Ives, an analyst with Wedbush that has been very bullish on Tesla’s stock. The drop in sales was far worse than expected, he said in a note to investors.

The quarter is a “seminal moment” in the Tesla growth story, Ives wrote, adding that CEO Elon Musk will have to turn the company around. “Otherwise, some darker days could clearly be ahead that could disrupt the long-term Tesla narrative.”

Ives maintained his Outperform rating and cut his one-year price target from US$315, to US$300.

“Street criticism is warranted as growth has been sluggish and (profit) margins showing compression, with China a horror show and competition increasing from all angles,” Ives wrote.

Tesla dramatically lowered US prices by up to US$20,000 for some models last year. In March it temporarily knocked US$1,000 off the Model Y, its top-selling vehicle. Those price cuts narrowed the company’s profit margins and spooked investors.

Analysts polled by FactSet expected the average selling price for Model Y to be US$41,000 last quarter, US$5,000 less than a year ago and US$15,000 lower than the peak of US$56,000 in June of 2022.

Shares of Tesla tumbled 5.1 per cent in in midday trading Tuesday to US$166.28, continuing an extended decline. Investors have shaved more than 30 per cent off the value of the company so far this year, dumping shares after growing leery of the tremendous growth story that Tesla has been telling.

Tesla’s sales numbers pulled down shares of its EV competitors in the United States. Shares of Rivian and Lucid each dropped more than 5 per cent on Tuesday.

During the quarter, Tesla lost production time in Germany after a suspected arson attack cut its power supply. Ives estimated that China sales slid 3.0 per cent to 4.0 per cent during the period.

Deliveries of the Models 3 and Y, fell 10.3 per cent year over year to 369,783. Sales of the company’s other models, the ageing X and S and the new Cybertruck, rose almost 60 per cent to 17,027. Tesla produced 10.7 per cent more vehicles than it sold during the first quarter.

Softer than expected first-quarter sales are reducing analyst expectations for quarterly earnings when they are released on April 23. Citi Analyst Itay Michaeli cut his full year 2024 earnings per share estimate to US$2.71 from US$2.78.

Tesla’s sales come against the backdrop of a slowing market for electric vehicles in the US EV sales grew 47 per cent last year to a record 1.19 million as EV market share rose to 7.6 per cent. But sales growth slowed toward the end of the year. In December, they rose 34 per cent.

Updated EV sales numbers were due later Tuesday when most automakers report US sales.

Other automakers also have had to cut electric vehicle production and reduce prices to move EVs off dealership lots. Ford, for instance, cut production of the F-150 Lightning electric pickup, and lopped up to US$8,100 off the price of the Mustang Mach E electric SUV in order to sell 2023 models.

AP