Tesla Inc. finds itself on the brink of a challenging milestone as dwindling demand for electric vehicles coupled with rising interest rates cast a shadow over its sales figures.
As the quarter drew to a close, analysts swiftly revised their projections for Tesla’s upcoming delivery report. There’s a palpable sense of apprehension on Wall Street, with some anticipating Tesla’s first sales decline since the early days of the pandemic.
According to analysts surveyed by Bloomberg, the consensus estimate pegs Tesla’s deliveries for the quarter at 449,080 vehicles, marking a decline of over 7% from the company’s stellar performance in the previous quarter, typically buoyed by year-end sales.
The pivotal factor now hinges on whether Tesla can surpass its delivery count of 422,875 vehicles in the first quarter of 2023, thereby avoiding its first year-over-year drop since Q2 2020.
In a move that could further dampen sales prospects, CEO Elon Musk introduced a new directive in the final week of March. This directive, while aimed at enhancing safety, necessitates that every customer in North America undergo a short test drive to experience Tesla’s driver-assistance feature, marketed somewhat misleadingly as Full Self-Driving.
To sweeten the deal for potential buyers, Tesla rolled out several incentives, including a free one-month trial of the Full Self-Driving feature and temporary discounts of $1,000, along with complimentary supercharging. Additionally, the company ramped up advertising efforts on platforms like Google and X, the social media service owned by Musk.
Investors were cautioned by Musk back in January about Tesla being “between two major growth waves,” with the first wave propelled by the success of the Model 3 sedan and Model Y SUV. However, with the launch of a cheaper next-generation vehicle slated for late next year, concerns loom over Tesla’s growth trajectory for the current year.
Emmanuel Rosner of Deutsche Bank, after revising his estimates downward twice in just over two weeks last month, now anticipates Tesla’s sales figures to hover around 414,000 cars for the quarter, reflecting a 2% dip from the previous year.
“We think worries over volume and earnings could further dampen investor sentiment and put significant pressure on the stock,” Rosner wrote in a report on March 28. Tesla shares have already tumbled 29% this year, marking the poorest performance on the S&P 500 Index.
Tesla encountered several stumbling blocks in the quarter, including multiple shutdowns of its plant near Berlin and a transition of its California factory to produce an upgraded version of the Model 3, which typically slows down production.
Meanwhile, in China, Tesla faces stiff competition from BYD Co., which clinched the title of the world’s top-selling EV maker at the close of last year. To navigate these challenges, Tesla instructed employees at its Shanghai facility to reduce production by operating five days a week instead of the usual 6 1/2 days, as reported by Bloomberg News.
While Tesla’s lineup includes the Model S, Model X, and the recently launched Cybertruck, the bulk of its deliveries in the previous year were driven by the Model 3 and Model Y, accounting for 96% of its global deliveries.
As Tesla braces for what could be a turbulent quarter, the company remains focused on overcoming market headwinds and sustaining its position in the competitive electric vehicle landscape.