Tesla slides after quarterly deliveries decline

Bengaluru/San Francisco — Tesla on Tuesday posted a decline in quarterly deliveries for the first time in nearly four years and missed Wall Street estimates, a performance some described as “ugly” as price cuts failed to stir demand in a highly competitive market.

Shares of the Elon Musk-led company were down 5.3% at $165.98 at midday on Tuesday, losing about $30bn in market value. The shares have fallen about 33% so far this year.

After years of rapid sales growth that helped turn Tesla into the world’s most valuable automaker, the company is bracing for a slowdown in 2024.

The electric vehicle maker has been slow to refresh its ageing models as high interest rates have sapped consumer appetite for big-ticket items and rivals in China, the world's largest auto market, are rolling out cheaper models.

Tesla’s deliveries declined 8.5% in the first quarter to 386,810 vehicles from a year ago and the company produced 433,371 vehicles during the period. Wall Street on average had expected Tesla to deliver 454,200 vehicles, according to 18 analysts polled by Visible Alpha.

The last time it posted a sales fall was in the second quarter of 2020 when the Covid-19 pandemic forced the automaker to shut down production.

Tesla attributed the drop in volumes partly to efforts to prepare its Fremont, California, factory to handle increased production of the updated Model 3 and to shutdowns at its Berlin plant due to the impact of the Red Sea conflict and an arson attack.

But Tesla produced 46,000 more vehicles than it sold in the first quarter, signalling softer demand, analysts said.

The vehicle inventory “confirms that beyond the known production bottleneck, there may also be a serious demand issue,” Deutsche Bank analyst Emmanuel Rosner wrote in a note.

Competition in China

Tesla has faced intense competition in China from local players including market leader BYD — which overtook the US company as the largest EV maker in the fourth quarter — and new entrant Xiaomi.

Tesla managed to steer ahead of BYD, which sold about 300,000 battery-electric vehicles (BEV) in the quarter.

Still, the Chinese carmaker backed by Warren Buffett posted a 13% increase in BEV sales globally in the first quarter from a year earlier. Hyundai Motor said sales of its Ioniq 5 and Ioniq 6 electric vehicles jumped by nearly 80% to 10,468 units in the US in the first quarter.

Gene Munster, managing partner at Deepwater Asset Management, called the quarter “ugly” for Tesla, blaming high interest rates and cooling excitement around EVs. He remained upbeat, however, on the company’s long-term prospects.

CEO Musk’s persona, his tilt to right-wing politics and his public statements are also turning away some potential Tesla customers in the US, according to surveys and experts.

Wedbush Securities analyst Dan Ives called the results “an unmitigated disaster” and termed them a seminal moment for Tesla.

“This was a train wreck into a brick wall quarter for Musk & Co,” he wrote in a research note.

In January, Tesla also warned of “notably lower” sales growth this year as it focuses on the production of its next-generation electric vehicle.

Tesla delivered 369,783 Model 3 and Model Ys, and about 17,000 vehicles of other models, including Model S sedan, Cybertruck and Model X premium SUV.

Meanwhile, California-based EV maker Rivian reported stronger-than-expected quarterly vehicle deliveries, but the stock was pulled down by Tesla’s results and worries about demand, according to analysts.

Reuters