Wednesday Apr 3 2024 12:43
4 min
Tesla stock fell over 5% on Tuesday following the announcement of first-quarter vehicle delivery numbers that significantly missed analysts' expectations, according to a statement released by the electric vehicle (EV) manufacturer.
Tesla shares closed Tuesday trading at $166.63, down 4.9%. At the time of writing on Wednesday, TSLA stock was down 1.37% in premarket hours at $164.27.
The company reported it had delivered 386,783 vehicles during the quarter, missing the anticipated 457,000 vehicles forecasted by FactSet and showing a decline from the 423,000 vehicles delivered in the same period last year.
“Decline in volumes was partially due to the early phase of the production ramp of the updated Model 3 at our Fremont factory and factory shutdowns resulting from shipping diversions caused by the Red Sea conflict and an arson attack at Gigafactory Berlin,” Tesla said in its release.
Deliveries of Model 3 and Model Y vehicles, which totaled 369,783, accounted for most of the figures.
Tesla also disclosed production of 433,371 units in the first quarter.
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The discrepancy between deliveries and production implies about 46,000 EVs in inventory, “which confirms that beyond the known production bottleneck, there may also be a serious demand issue,” Emmanuel Rosner at Deutsche Bank said in a note cited by MarketWatch. He added:
“In our view, the production figure was predictably soft, but the miss was in deliveries, likely largely due to demand issues in the U.S.”
Investors are primarily concerned about the extent to which Tesla's delivery shortfall can be attributed to the factors mentioned in the announcement, as well as the surge in demand towards the end of last year — when several Model 3 buyers hurried to benefit from phasing out tax credits — versus the extent to which it reflects broader market dynamics or trends specific to Tesla, Tom Narayan at RBC Securities told MarketWatch.
According to Narayan, the slowdown in the electric vehicle market in the U.S. probably played a role, and he noted that Tesla's Model 3 and Model Y have become “somewhat saturated” in the market.
Tesla’s recent offer of one month of free Full Self Driving, its suite of advanced driver assistance features for driving in urban areas, may serve as a catalyst for the second quarter, the analyst said, adding:
“Worst case it brings folks into the show room and best case, it increases the FSD attach rate and possibly increases 3/Y deliveries. The China situation is another open question. [January and February] were very soft months for the market but that is seasonally normal”.
Further insights into Tesla's performance were revealed with data from the China Passenger Car Association, indicating Tesla sold 89,064 China-made cars in March alone. This represents a marginal 0.2% increase from the previous year, even as overall EV sales in China surged by 33%.
Compared to Tesla's modest growth, BYD Co. emerged as the dominant force in the Chinese market, with sales exceeding 300,000 vehicles in March, marking a 46% year-over-year increase.
Tesla has been grappling with increased competition in China, leading to a cautious outlook from analysts. Tesla shares have dropped 33% year-to-date and 10% over the past 12 months, in stark contrast to the S&P 500 index, which rose by 9% and 27.2% in the respective timeframes.
The Tesla earnings call at the end of January also did the stock no favors, as the EV manufacturer cautioned investors about a potential growth slowdown in 2024, sending TSLA shares tumbling by over 10%.
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