Tesla sales fell sharply last quarter as competition increased worldwide, electric vehicle sales growth slowed, and price cuts failed to draw more buyers
Tesla has seen a near 9% drop in sales at the beginning of this year.
The fall is due to increasing competition and a slowing demand for electric cars, with price cuts failing to attract more buyers. The Texas-based company reported that it sold 386,810 vehicles from January through March.
This is almost 9% fewer than the 423,000 cars it sold over the same period last year. These numbers didn’t meet the expectations of Wall Street analysts either. Experts had predicted that they would sell 457,000 vehicles.
Tesla said the drop was partly because a new model of their Model 3 car is being made at one of their factories. They also explained that plant shutdowns caused by delivery issues and a fire that cut power to their German factory had a negative impact on sales as well.
In a letter to investors in January, Tesla warned that sales growth this year might be “notably lower”. They said this is because the company is between two big periods of growth: first, the global expansion of models 3 and Y; and second, the release of a new, cheaper car, the Model 2.
Last year, Tesla brought down the prices of its cars in America quite dramatically, some by as much as $20k. Just last month, they temporarily reduced the price of their top-selling vehicle, the Model Y, by $1,000.
But these price cuts scared off investors since it meant they made less profit. Tesla shares fell by 5.5% to $165.60 in Tuesday morning’s trading, continuing a downward trend. So far this year, investors have knocked about 34% off the company’s value, selling shares after becoming sceptical of Tesla’s impressive growth story.
Wedbush analyst Dan Ives, who is usually positive about the stock, said in a note to investors on Tuesday that sales were much worse than anticipated. “This was an unmitigated disaster 1Q that is hard to explain away,” he wrote. He said that this quarter was a key moment in Tesla’s growth story and that CEO Elon Musk needs to turn things around. “Otherwise, some darker days could clearly be ahead that could disrupt the long-term Tesla narrative.”
Despite this, Ives kept his Outperform rating but reduced his one-year price target from $315 to $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. During the quarter, Tesla lost production time in Germany due to a suspected arson attack that cut its power supply.
Production in the US was slowed down by an upgrade to the Model 3, and Ives estimated that sales in China dropped by 3% to 4% during the period. Sales of Tesla’s most popular models, the 3 and Y, dropped by 10.3% year on year to 369,783. However, sales of their other models, the older X and S and the new Cybertruck, jumped nearly 60% to 17,027.
In the first quarter, Tesla made 10% more cars than it sold. Analysts are lowering their predictions for quarterly earnings due to weaker than expected sales in the first quarter. These will be announced on April 23. Citi Analyst Itay Michaeli has reduced his estimate for full year 2024 earnings per share from $2.78 to $2.71.
These sales figures come at a time when the market for electric vehicles in the US is slowing down. Last year, EV sales hit a record 1.19 million, a growth of 47%, and their market share increased to 7.6%. However, this growth slowed towards the end of the year, with a rise of only 34% in December.
