Tesla’s first-quarter car deliveries fell precipitously, marking a dismal start to the year for a business plagued by issues with the market and reputation.
The delivery figures released on Tuesday came amid a sluggish market for electric cars, rising borrowing costs, a slew of litigation targeting Tesla’s patents, and a scandal involving the company’s CEO, Elon Musk. In a January earnings call, Musk issued a warning, stating that Tesla would expand at a “notably lower rate” this year while it makes investments in a next-generation car that it intends to begin producing in 2025.
According to Tesla, it delivered 387,000 cars to consumers in the first quarter, a 20% decrease from the previous quarter and a more than 8% decrease from the same period last year.
According to Wedbush Securities analyst Dan Ives, prior to Tuesday’s news, Wall Street analysts had predicted that Tesla would post 443,000 deliveries for the quarter. On Tuesday, shares of Tesla dropped 4.9%.
The business attributed the delay, at least in part, on the move to early production of the upcoming Model 3 car, problems with shipping across the Red Sea, and possible arson at its Berlin plant.
For Tesla’s “ugly delivery number,” Deepwater Asset Management analyst Gene Munster cited the overall state of the economy as well as a decline in EV confidence. Munster tweeted that financing more expensive electric cars has become more costly because of rising interest rates. He also noted that “the excitement around [electric vehicles] has cooled, which further dampens sales.”
However, he added that Tesla remains “on the right track.”
Ives compared the first quarter of the business to “a train wreck into a brick wall.” According to Ives, Musk must now design a turnaround as the business pushes forward with its next car.
“Let’s face it: This was an absolute disaster of a first quarter that is difficult to explain away, even though we were expecting a bad one,” Ives stated. “We see this as a turning point in the Tesla narrative where Musk has the opportunity to either reverse the black eye 1Q performance or turn things around. If not, it appears that there may be some gloomier times ahead, which might upend the Tesla story in the long run.
The electric vehicle manufacturer, whose shares fell more than 20 percent in the first quarter, dropped prices throughout 2023 to keep up with demand, but analysts said such reductions were insufficient to get over the challenges it faced in the first quarter of 2023.
Karl Brauer, an executive analyst with the auto research firm ISeeCars.com, described it as “death by 1,000 cuts.” Although Musk “has never had a demand problem,” there have been more signs in the last year or so that he is making more cars than the market is willing to buy.
Tesla reported that it produced 433,000 cars in the first quarter, which is 46,000 more than it shipped.
Other broader market forces are working for Tesla. Although the United States continues to see greater growth in sales of electric cars than gasoline cars, interest in these vehicles has recently begun to decline due to a lack of infrastructure for charging, among other reasons. Some automakers, like Mercedes-Benz, have lowered their short-term electrification goals or postponed them.
However, BYD, a Chinese manufacturer of electric vehicles, surpassed Tesla in terms of quarterly sales of electric vehicles last year.
The company’s issues are exacerbated by Tesla’s declining sales figures. Regulators are also paying it more attention because of its driver-assistance program, Autopilot. Nearly every automobile the business has ever made was included in the 2 million vehicles that were recalled last year due to worries that the technology had sufficient safeguards to prevent driver abuse. The National Highway Traffic Safety Administration’s extensive examination of the technology led to the recall, which was carried out via remote update.
The Washington Post released an investigation a few days before the recall announcement, which showed that Autopilot was involved in at least eight fatal or seriously injured crashes in places where the software was not supposed to be employed.
cases concerning the company’s Autopilot software are also being filed. These cases seek to determine whether the software should share any of the blame for malfunctions in vehicles driven by the driver or whether the driver bears the entire responsibility. This month, a jury will decide whether to try Tesla for wrongful death. The case concerns a 2018 Tesla on Autopilot that crashed into a median on Highway 101 in Northern California while the driver was reportedly not paying attention.
Thus far, the business has been successful in avoiding liability: in a lawsuit concerning Autopilot’s purported involvement in a fatal incident in Riverside, California, a jury last year held Tesla not guilty.
Munster of Deepwater Asset stated before Tuesday’s announcement that neither Musk nor investors seemed to be affected by Tesla’s legal troubles. To further solidify his support for Full Self-Driving, Tesla’s top driver-assistance system, Musk mandated last month that staff members install and demonstrate the most recent version to clients before closing a deal.
In an email to his employees that was initially obtained, Elon Musk stated, “Going forward, it is mandatory in North America to install and activate FSD V12.3.1 and take customers on a short test ride before handing over the car.” The effectiveness of (supervised) FSD is almost unknown. Although I am aware that this may delay delivery, it is still an unreasonable condition.
According to a poll conducted by market research firm Caliber and sent to Reuters, Tesla’s “consideration score” dropped to 31% in February from a peak of 70% in November 2021, when the company began monitoring consumer interest in the brand. A portion of the study referenced Musk’s contentious background. One of the richest persons in the world, Elon Musk, has courted controversy in the last year by endorsing strict immigration policies, encouraging antisemitic discourse, pushing conspiracy theories, and denouncing liberal causes as a “woke mind virus.”
His divisive remarks have turned off advertisers and users from his owned social media network, X, which was once known as Twitter.
Musk claims that Tesla is “between two major growth waves” and that the company’s current sales problems are just the result of economic cycles.
Regarding Tesla’s poor sales, Brauer stated that the company’s legal troubles and Musk’s demeanor aren’t the main causes of the drops. However, it “certainly isn’t helping,” he declared.
He claimed that “those factors are only leading to all the challenges.”
An inquiry for comment from Tesla was not answered.
