The Austin, Texas, company said Tuesday that it delivered
386,810 vehicles worldwide from January through March, almost nine per cent
below the 423,000 it sold in the same quarter of last year. It was the first
year-over-year quarterly sales decline in nearly four years.
Sales also fell short of even the most bearish Wall Street
expectations. Auto industry analysts polled by FactSet were looking for 457,000
vehicle deliveries from Tesla Inc. That’s a shortfall of more than 15 per cent.
The company blamed the decline in part on phasing in an
updated version of the Model 3 sedan at its Fremont, California, factory, plant
shutdowns due to shipping diversions in the Red Sea, and an arson attack that
knocked out power to its German factory.
But TD Cowen Analyst Jeffrey Osborne wrote in a note to
investors that weaker March sales indicate that incentives, including discounts
and a free trial of “Full Self Driving” software, “did not work as demand
deteriorated.”
Despite the sales decline, Tesla was able to retake its
global EV sales crown from China’s BYD, which sold just over 300,000 electric
vehicles during the quarter, Osborne wrote.
In its letter to investors in January, Tesla predicted
“notably lower” sales growth this year. The letter said Tesla is between two
big growth waves, one from global expansion of the Models 3 and Y, and a second
coming from the Model 2, a new, smaller and less expensive vehicle with an
unknown release date.
“This was an unmitigated disaster 1Q that is hard to explain
away,” wrote Dan Ives, an analyst with Wedbush who has been very bullish on
Tesla's stock. The drop in sales was far worse than expected, he wrote in a
note to investors.
The quarter is a “seminal moment” in the Tesla growth story,
Ives wrote, adding that CEO Elon Musk will have to turn the company around.
“Otherwise, some darker days could clearly be ahead that could disrupt the
long-term Tesla narrative.”
Ives maintained his Outperform rating on Tesla's shares and
cut his one-year price target from US$315 to US$300. Ives estimated that China
sales slid three per cent to four per cent during the period.
Shares of Tesla tumbled 4.9 per cent to close Tuesday at
US$166.63, continuing an extended decline. Investors have shaved 33 per cent
off the value of the company so far this year, dumping shares after growing
leery of the tremendous growth story that Tesla has been telling.
“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.
Tesla dramatically lowered U.S. prices by up to US$20,000
for some models last year. In March it temporarily knocked US$1,000 off the
Model Y, its top-selling vehicle. Those price cuts narrowed the company’s
profit margins and spooked investors.
Analysts polled by FactSet expected the average selling
price for Model Y to be US$41,000 last quarter, US$5,000 less than a year ago
and US$15,000 lower than the peak of US$56,000 in June of 2022.
Tesla's sales numbers also pulled down shares of its U.S. EV
competitors. Shares of Rivian fell 5.2 per cent, while Lucid stock dropped 3.5
per cent on Tuesday.
Deliveries of the Models 3 and Y, fell 10.3 per cent year
over year to 369,783. Sales of the company's other models, the aging X and S
and the new Cybertruck, rose almost 60 per cent to 17,027. Tesla produced 10.7
per cent more vehicles than it sold during the first quarter.
Softer-than-expected first-quarter sales are reducing
analyst expectations for Tesla's quarterly earnings ahead of their scheduled
release on April 23.
Tesla’s sales come against the backdrop of a slowing market
for electric vehicles in the U.S. EV sales grew 47 per cent last year to a
record 1.19 million as EV market share rose to 7.6 per cent. But sales growth
slowed toward the end of the year. In December, they rose 34 per cent.
Updated EV sales numbers will come later Tuesday when most
automakers report U.S. sales.
Other automakers also have had to cut electric vehicle
production and reduce prices to move EVs off dealership lots. Ford, for
instance, cut production of the F-150 Lightning electric pickup, and lopped up
to US$8,100 off the price of the Mustang Mach E electric SUV in order to sell
2023 models.