Tesla Inc.’s stock declined 29% on April 2 following the company’s first-quarter delivery report, which fell significantly short of expectations.
Tesla reported 386,810 global deliveries for Q1, below the estimated 449,080. It marks the first annual quarter drop in deliveries since 2020, concerning analysts about its implications for Tesla’s future performance.
“We caution Tesla shares could fall much further still should the company not be successful in quickly restoring unit volume and revenue growth,” Ryan Brinkman, an analyst from JPMorgan Chase & Co., wrote on April 3, pointing out the risk to Tesla’s stock price if itis no longer perceived as a hyper-growth company.
Tesla’s drop in shares was the largest decline since late 2022 and the third most substantial quarterly decrease since the company went public in 2010. At closing, Tesla’s stock was down approximately 5% at $166.63 per share.
Others, like Cathie Wood, CEO of Ark Invest, said other upsides, like artificial intelligence, would offset Tesla’s struggles.
“Tesla is the largest AI project in the world, and that it is going to redefine transportation — from human driven to autonomous,” Wood said.
The company’s production of 433,371 vehicles also missed estimates. Particularly worrying for investors was the sequential and year-over-year decline in delivery figures, with deliveries in the first quarter of 2024 lower than both the first and last quarter of 2023.
Analysts attribute Tesla’s challenges in the first quarter to various factors, including supply chain disruptions, competition in key markets like China and mixed reviews for its latest model, the Cybertruck. Tesla’s CEO Elon Musk’s mandates and statements may have influenced consumer sentiment negatively as well, contributing to a shrinking customer base.
Supply chain disruptions due to Houthi militia attacks on shippers in the Red Sea disrupted the supply of vehicle components and led to temporary production halts at its German factory near Berlin in January. Additionally, in March, environmental activists caused disruptions by setting fire to infrastructure near the same factory.
In China, Tesla faced stiff competition from local electric vehicle manufacturers like BYD Co. Ltd. and newcomers like Xiaomi Corp. Slow sales of its China-made cars in January and February prompted Tesla to scale back production of its Model 3 and Model Y at its Shanghai plant, reducing worker schedules from six to five days a week.
In the United States, opinions varied regarding Tesla’s latest model, the Cybertruck, an unconventional angular pickup truck which the electric vehicle manufacturer started selling in limited quantities in December of 2023. Despite offering discounts and incentives, Tesla experienced less success in boosting sales volume compared to previous endeavors.
The discrepancy between production and deliveries suggests a potential inventory buildup, indicating possible demand challenges. This is reflected in Tesla’s recent price hikes, which may pose further risks to average selling prices for the rest of the year.
