Tesla showed much lower-than-expected quarterly sales as Elon Musk’s EV company gets eaten by competition.
Elon Musk’s EV automaker Tesla reported disastrous quarterly sales according to a company’s report coming out on Wednesday. In late 2023, Tesla lost the top spot as the world’s best-selling EV carmaker to China’s BYD.
Though Tesla regained first place in the first quarter of 2024, analysts point to a decline in sales for BYD as the most likely reason. Indeed, despite climbing up the global ranking, Tesla’s sales were still grossly below expectations.
Quarterly sales for Tesla came in at 387,000 vehicles, down from the 414,000 - 440,000 expected range. This represents an 8.5% drop from the first quarter of 2023. In Q4 last year, Tesla reached record new deliveries at 484,507 vehicles.
CEO Elon Musk cited many reasons for the drop in new deliveries. He blamed delayed shipments due to tensions in the Red Sea and the temporary shutdown of two vital production lines in Freemont and Germany.
However, Tesla produced 433,000 new vehicles in the last quarter, not far from its normal quarterly production. Deutsche Bank analyst Emmanuel Rosner said that production levels "confirm that beyond the known production bottleneck, there may also be a serious demand issue."
Tesla’s share price fell 1.28% in pre-trade on Wednesday after plunging by more than 5% on Tuesday.
Shifting ground
Despite what Musk said, many analysts say increased competition from China and low global demand are the real cause of the sales plunge.
In 2023, China overcame Japan and Germany as the world’s largest producer of electric vehicles. It raised alarm bells all over the global carmaking industry, with immediate responses from American and European producers.
For its part, Tesla initiated a bloody price war against Chinese producers, slicing its margins to keep demand high. The latest sales report points to a major failure of this strategy.
Over 95% of Tesla’s declining sales are made up of Model 3s and Model Ys. The company’s latest model, the Cybertruck, has been deemed a failure even by Elon Musk. Its cutting-edge models were what supported most of Tesla’s growth, but the lack of new releases is quickly making them obsolete.
It doesn’t help that global EV demand is waning. A recent report showed that US consumers still prefer hybrid cars, which prompted many brands to scale down deliveries.
But while the likes of Ford, Volkswagen, and Toyota can simply go back to fuel cars, Tesla does not have that choice. “Some darker days could clearly be ahead that could disrupt the long-term Tesla narrative,” Wedbush Securities analyst Dan Ives said.
