Largest Sales Decline in Tesla’s History Deals Major Setback to Electric Vehicles

Largest Sales Decline in Tesla’s History Deals Major Setback to Electric Vehicles

(Bloomberg) — Tesla Inc. asked Wall Street analysts to question their models at the end of the first quarter. One after the other, they reduced their estimate of vehicle deliveries.

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They haven’t cut enough.

The Elon Musk-led automaker delivered just 386,810 vehicles in the first three months of the year, missing Bloomberg’s average estimate of the largest margin ever in data going back seven years. Tesla shares fell 4.9% on Tuesday in New York, extending their 2024 decline to 33%, the second-worst performance on the S&P 500 index.

A myriad of red flags were raised throughout the quarter. First, Tesla warned that its growth rate would be “significantly lower” this year, blaming interest rate hikes that have kept its cars out of reach for many consumers, even as prices have been reduced. The company faced multiple disruptions at its factory outside Berlin. Musk engaged in inflammatory posts about X, putting off potential buyers, and China’s electric vehicle market became even more fierce.

Despite all of these obvious headwinds, most still expected Tesla to sell more vehicles than it did a year ago. Instead, deliveries ended up falling 8.5%.

“Whatever it was, it was ugly,” said Gene Munster, managing partner of Deepwater Asset Management. “Demand is low. Interest rates are still high. Is Elon’s brand hurting Tesla’s US sales? It’s directionally negative.

Read more: China’s super-cheap electric vehicles are causing headaches in America

Tesla blamed the decline in part on its shift to an upgraded version of the Model 3 sedan, which along with the Model Y sport utility vehicle accounted for 96% of the quarter’s deliveries. It also cited Red Sea-related shipping delays and the suspected arson that cost it days of production in Germany.

Yet Tesla produced 46,561 more cars than it sold to customers during the quarter, marking one of the largest mismatches in the company’s history.

“Beyond the known production bottleneck, there could also be a serious demand problem,” wrote Emmanuel Rosner, a Deutsche Bank analyst with a buy rating on Tesla shares, in a report. He had cut his delivery estimate twice in just over two weeks before the automaker’s release and still overestimated the company’s sales by more than 24,000 vehicles.

Tesla doesn’t break down its quarterly vehicle sales by region, but the United States and China have long been its largest markets. The company manufactures Models S, X, 3 and Y in Fremont, California, and Models 3 and Y in Shanghai. It also produces the Model Y at its factories in Austin and outside Berlin.

Musk added to the lineup late last year with the introduction of the stainless steel-clad Cybertruck. The company has not yet said how many pickup trucks it produces and delivers, lumping them in with other models including the S and X. The share of leased Tesla vehicle deliveries remained depressed compared to previous quarters.

Despite its difficulties, Tesla managed to regain its title as the world’s leading seller of electric vehicles, taking over the leadership of the Chinese group BYD Co. In the first quarter, BYD delivered 300,114 battery electric vehicles worldwide. Including plug-in hybrids, the company sold 626,263 vehicles.

–With help from Catherine Larkin, Chester Dawson, Anne Cronin and Craig Trudell.

(Updates with closing stock price in third paragraph.)

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