Tesla Sales Tumble Nearly 9%, Most In 4 Years, As Competition Heats Up And Demand For EVs Slows

DETROIT — Tesla’s sales fell drastically last quarter as competition intensified globally, electric vehicle sales growth stagnated, and price cuts failed to entice additional buyers.

The Austin, Texas-based business announced Tuesday that it delivered 386,810 vehicles worldwide from January to March, nearly 9% less than the 423,000 it sold in the same quarter last year. It was the first year-over-year quarterly sales drop in over four years.

Sales again fell short of even the most pessimistic Wall Street forecasts. FactSet questioned auto industry analysts, and they expected Tesla Inc. to deliver 457,000 vehicles. This is a more than 15% shortage.

Tesla Sales Tumble Nearly 9%, Most In 4 Years, As Competition Heats Up And Demand For EVs Slows

The business partially attributed the reduction to introducing an improved version of the Model 3 car at its Fremont, California, production, plant closures due to shipping diversions in the Red Sea, and an arson attack that cut out electricity to its German manufacturing.

However, TD Cowen Analyst Jeffrey Osborne noted that weaker March sales show that incentives, such as discounts and a free trial of “Full Self Driving” software, “did not work as demand deteriorated.”

According to Osborne, despite the sales dip, Tesla reclaimed the global EV sales lead from China’s BYD, which sold slightly more than 300,000 electric vehicles in the quarter.

In a letter to investors in January, Tesla expected “notably lower” sales growth this year. The letter stated that Tesla is experiencing two major growth waves: one from the global expansion of the Model 3 and Y and the other from the Model 2, a new, smaller, and less expensive vehicle with an unclear release date.

“This was an unmitigated disaster 1Q that is hard to explain away,” commented Dan Ives, a Wedbush analyst who has been quite positive on Tesla’s shares. In a note to investors, he stated that the sales loss was much greater than expected.

According to Ives, the quarter marks a “seminal moment” in Tesla’s growth story, and CEO Elon Musk must turn the firm around. “Otherwise, some darker days could clearly be ahead that could disrupt the long-term Tesla narrative.”

Tesla Sales Tumble Nearly 9%, Most In 4 Years, As Competition Heats Up And Demand For EVs Slows

Ives maintained his Outperform rating on Tesla shares while lowering his one-year price estimate from $315 to $300. Ives projected that China sales fell 3% to 4% during the period.

Tesla shares fell 5.6% to $165.45 in Tuesday afternoon trade, continuing their long-term slump. Investors have sliced more than 30% off the company’s worth this year, selling shares after becoming skeptical of Tesla’s massive growth story.

“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 in a blog post.

Last year, Tesla substantially reduced pricing in the United States by up to $20,000 for some models. In March, it temporarily reduced the price of its best-selling vehicle, the Model Y, by $1,000. These price cutbacks reduced the company’s profit margins and concerned investors.

FactSet analysts predicted Model Y’s average selling price to be $41,000 last quarter, $5,000 less than a year ago and $15,000 less than the top of $56,000 in June 2022.

Tesla’s sales figures also dragged down the stock prices of its US EV competitors. Rivian and Lucid’s shares fell around 5% each on Tuesday.

During the quarter, Tesla lost manufacturing time in Germany due to a suspected arson attack on its power supply.

Tesla Sales Tumble Nearly 9%, Most In 4 Years, As Competition Heats Up And Demand For EVs Slows

Deliveries of Models 3 and Y decreased 10.3% year on year to 369,783. Sales of the company’s other models, including the elderly X and S and the new Cybertruck, increased by nearly 60% to 17,027. Tesla made 10.7% more vehicles than it sold in the first quarter.

Softer-than-expected first-quarter sales are lowering analyst estimates for Tesla’s quarterly earnings, which are planned for release on April 23.

Tesla’s sales come amid a declining market for electric automobiles in the United States. Last year, EV sales increased by 47% to a record 1.19 million, with EV market share rising to 7.6%. But sales growth halted near the conclusion of the year. In December, they jumped 34%.

Updated EV sales figures will be released later Tuesday when most automakers report U.S. sales.

Other automakers have had to slash electric vehicle output and pricing to move EVs off dealership lots. Ford, for example, halted production of the F-150 Lightning electric truck and reduced the price of the Mustang Mach E electric SUV by up to $8,100 to sell 2023 versions.

SOURCE – (AP)