Tesla saw a sharp decline in sales last quarter amid increasing competition worldwide, a slowdown in electric vehicle sales growth, and unsuccessful price cuts.
The company, based in Austin, Texas, reported delivering 386,810 vehicles from January to March, nearly 9% below the 423,000 units sold in the same quarter a year ago. This figure also fell short of Wall Street's expectations, with analysts expecting Tesla Inc. to deliver 457,000 vehicles, according to FactSet.
Tesla attributed this decline in part to the phased introduction of an updated version of the Model 3 sedan at its Fremont, California, factory, plant closures due to shipping disruptions in the Red Sea, and an arson attack that caused a power outage at its German factory.
In its January investor letter, Tesla anticipated "notably lower" sales growth for the year, positioning itself between two significant growth phases: one from the global expansion of the Models 3 and Y, and another expected from the Model 2, a new, smaller, and more affordable vehicle.
Last year, Tesla significantly lowered prices in the U.S., reducing prices by up to $20,000 for certain models. In March, it temporarily reduced the price of the Model Y by $1,000, its best-selling vehicle. These price reductions impacted the company's profit margins, leading to concerns among investors. As a result, Tesla's shares fell by 6.3% at the opening bell on Tuesday, continuing a prolonged decline. Investors have reduced the company's value by approximately 34% so far this year, selling shares amid growing skepticism about Tesla's remarkable growth narrative.
Wedbush analyst Dan Ives, typically optimistic about the stock, described the first-quarter deliveries as a "nightmare quarter" for Tesla. Despite maintaining an Outperform rating on the stock, Ives reduced his one-year price target from $315 to $300.
During the quarter, Tesla faced production disruptions in Germany following a suspected arson attack that disrupted its power supply. U.S. production was also affected by upgrades to the Model 3. Ives estimated a 3% to 4% decline in China sales during the period.
Deliveries of the Models 3 and Y, Tesla's top-selling vehicles, dropped by 10.3% year-over-year to 369,783 units. However, sales of the company's other models, including the aging X and S, as well as the new Cybertruck, increased by almost 60% to 17,027. Tesla produced 10% more vehicles than it sold during the first quarter, according to Ives.
Ives noted that investor patience with Tesla is wearing thin. He emphasized that for Elon Musk, Tesla's CEO, this is a crucial moment to navigate the company through this challenging period, as failure to do so could lead to darker days ahead.
The softer-than-expected first-quarter sales have led analysts to lower their expectations for quarterly earnings, which are due to be released on April 23. Citi analyst Itay Michaeli reduced his full-year 2024 earnings per share estimate for Tesla to $2.71 from $2.78.