Tesla is expected to post another record quarter for electric vehicle (EV) deliveries. Still, it will likely fall short of an ambitious 2 million annual internal target that CEO Elon Musk touted at the beginning of the year.
The carmaker posted record production in the third quarter but missed analysts’ delivery expectations as it struggled with softening demand and factory upgrades. The Austin, Texas-based company sold 435,059 vehicles to customers last quarter, falling behind Q2’s record of 466,000 and well below the analyst consensus for 455,000.
EV sales have been weaker than expected amid rising interest rates, slowing global economic growth, and stiff competition from other automakers that offer more competitive pricing on their electric cars and trucks. Tesla has been slashing prices across its four car models to attract buyers in the face of competition and a rapidly aging fleet.
With a focus on its biggest market in China, the company has slashed prices of its most popular Model 3 and Model Y vehicles by as much as 20%. These discounts have helped the carmaker to hit record EV sales in the US in January and set new records for monthly sales in both the Model 3 and Y.
Despite the robust demand for its lower-priced vehicles, Tesla’s profitability will remain squeezed by costs from its Gigafactory operations and slowing demand abroad, where it has lost market share to locals, including BYD. The company also faces many issues with its new factories, including executive resignations, energy shortages, permitting conflicts, and construction delays.
Tesla will better understand its financial health when it reports results on April 19, including revenue, expenses, and profits. However, the company’s growing delivery numbers will be a crucial indicator of whether it can turn around its losses from recent quarters. The company’s delivery count is the best gauge of demand since the firm gets paid for its cars once they are delivered to customers.
The company will also be hoping to avoid a repeat of last month’s incident in which its Autopilot system mistakenly drove the car into a highway barrier and killed the driver. US safety regulators will review the accident to determine if the system was operating correctly.
Nevertheless, investors are still optimistic that Tesla can grow its sales and deliver on its 2 million target this year. Analysts polled by LSEG expect the company to deliver 1.82 million vehicles globally in 2023, up 37% from the prior year and with roughly 473,000 of those coming in the fourth quarter. A big finish to the year would allow Tesla to demonstrate that it can deliver on its aspirations without relying on price cuts that could further cut into margins.
