In a departure from its trend over the past four years, Tesla recorded a decrease in quarterly deliveries, falling short of Wall Street projections. Described by some as “ugly,” this performance came despite price reductions failing to invigorate demand in an intensely competitive market. The electric car manufacturer, spearheaded by Elon Musk, only managed to deliver 386,810 vehicles in the quarter, which was significantly below analysts’ forecasts. The results were the lowest since the COVID-19 pandemic in early 2020 and the first year-over-year drop, stoking investor concerns about Tesla’s growth prospects for 2024.
The company blamed the shortfall on the “early phase of the production ramp of the updated Model 3 at our Fremont factory, and factory shutdowns due to shipping diversions caused by the Red Sea conflict and an arson attack at Gigafactory Berlin.” Tesla also cited lower demand for its high-end models in China as a contributing factor.
Tesla has been facing stiff competition from established EV makers in the world’s largest auto market, where consumers are flocking to more affordable offerings by Chinese competitors. Its aging Model S and X cars are expensive enough to put many potential buyers off. At the same time, the high-interest rates driving broader economic uncertainty have sapped demand for big-ticket items such as cars.
Even so, some investors had hoped Tesla would turn the corner this year. The company warned in January that its rate of growth this year would be “notably lower” than last year as it invests in a new model and deals with reputation hazards stemming from Musk’s inflammatory tweet, an arrest for alleged securities fraud, and the loss of a key manufacturing partner.
Tesla’s decline in deliveries was the biggest in its history. However, it still produced more cars than it handed over to customers in the quarter- a rare mismatch in production and sales for the industry’s largest EV maker. That production number included the output of its aging Model S and X cars and the new Cybertruck SUV.
Shares of the company, which had been trading up over 5 percent ahead of the delivery report, fell more than 5 percent on Tuesday, erasing about $30 billion in market value. They have fallen about 33% so far this year, the steepest annual losses in more than a decade. Investors are bracing for a bleak earnings report scheduled for next week.