Tesla on Sunday reported record quarterly vehicle deliveries, but quarterly sales growth remained modest despite price cuts as competition intensified and the economic outlook dimmed.
Tesla delivered 422,875 vehicles in the first three months of this year, a 4% month-on-month increase. This is 36% higher than a year ago. In January, CEO Elon Musk said Tesla could deliver 2 million vehicles this year, a 52% increase from last year.
Investors have been eyeing Musk’s gamble that price cuts will spur sales, even as they worry about margin erosion.
In January this year, Tesla slashed prices by 20% globally, failing to meet Wall Street expectations for 2022 deliveries, triggering a price war. The base Model Y, which used to cost $65,990 (approximately Rs. 54,35,100), now costs $54,990 (approximately Rs. 45,29,100).
“It would be ugly if they don’t lower prices,” Gene Munster, managing partner at Deepwater Asset Management, said on Sunday. “I think what that tells you is the economy is getting tough.”
“They showed acceleration, but not to the level suggested by Elon.”
Musk, who has failed to meet Tesla’s ambitious sales goals in recent years, said in January that without external disruption, deliveries could rise to 2 million vehicles in 2023 from 1.3 million in 2022.
First-quarter deliveries fell short of analysts’ expectations of 430,008 vehicles, according to Refinitiv data based on seven analysts.
Wall Street expects Tesla to deliver about 432,000 vehicles this quarter, according to an average of estimates compiled by FactSet as of Friday, The Wall Street Journal and CNBC reported.
Tesla missed analysts’ expectations polled by Refinitiv and FactSet. Other estimates showed Tesla delivering 422,875 vehicles, beating Wall Street expectations.
Analysts polled by Bloomberg expected 421,164 vehicles to be shipped.
Tesla said more than 20 analysts agreed on delivery of 421,500 vehicles, Tesla investor Gary Black said in a tweet. Reuters could not independently confirm the figure.
Munster said there was consensus “everywhere.”
In the first three months of this year, deliveries of Tesla’s main Model 3/Model Y models increased by 6% compared with the previous quarter. However, deliveries of higher-priced Model X/Model S vehicles fell by 38%.
The automaker is producing more vehicles than it is delivering, producing 440,808 vehicles in the first three months of the year.
The automaker boosts output at new plants in Texas and Berlin while production in China recovers from COVID-19 lockdowns. Tesla said on Twitter on Sunday that its Texas factory produced 4,000 Model Y vehicles this week, while the automaker said in late February that its German factory was producing 4,000 vehicles per week.
More price cuts?
Barclays analyst Dan Levy expects Tesla may face pressure to cut prices further as many automakers also cut prices and concerns about a weakening economy persist.
Tesla did not immediately respond to a Reuters question about whether it would cut production further.
Subsidies for electric vehicles in the United States have further cast a shadow on the demand outlook, with some models likely to be subsidized starting from April 18.
Tesla’s price cuts in China have sparked a price war, with Chinese rivals such as BYD and Xpeng Motors cutting prices to defend market share amid weak demand.
In the first two months of this year, market leader BYD accounted for 41% of sales of so-called new energy vehicles in the world’s largest car market. By comparison, Tesla’s share is 8%.
Musk warned that the prospect of a recession and rising interest rates means the electric car maker may lower prices to maintain growth at the expense of profits. In January, Musk said price cuts were stimulating demand.
Although Tesla shares are still more than 50% below their November 2021 peak, they have soared more than 68% this year on hopes that the company can win the price war it launched.
Tesla shares have been falling since Tesla’s Investor Day on March 1, when Musk said little about how soon the electric car maker would launch a more affordable mass-market car.
© Thomson Reuters 2023