Tesla’s vehicle deliveries for the June quarter are expected to decline by 3.7%, marking the first time the top EV maker posts two consecutive quarters of reduced deliveries. This drop comes as Tesla grapples with fierce competition in China and sluggish demand driven by a lack of affordable new models. Analysts forecast Tesla will deliver 438,019 vehicles for the April to June period, according to an average estimate from 12 analysts polled by the London Stock Exchange Group (LSEG), with seven of them lowering their expectations in the past three months. The results are anticipated to be announced on Tuesday.
After years of rapid growth, Tesla has hit a speed bump threatening its status as the world’s most valuable automaker. In January, the company warned that delivery growth in 2024 would be “notably lower” due to diminishing benefits from extended price cuts. Contributing to Tesla’s challenges is a consumer shift towards cheaper gasoline-electric hybrid vehicles, resulting in a surplus inventory of Tesla vehicles that the company attempts to clear through price cuts and incentives like cheaper financing options and leases.
Earlier this year, CEO Elon Musk shelved plans for an all-new, affordable electric car, refocusing Tesla’s efforts on developing robotaxis. This decision has raised concerns among investors wary of the complexities of perfecting autonomous technology. Nonetheless, investors overwhelmingly supported Musk’s $56 billion pay package at last month’s annual shareholder meeting.
Barclays analyst Dan Levy predicts an 11% drop in second-quarter deliveries, which would be Tesla’s largest ever. Levy warned that “a soft delivery result could turn attention back to the currently challenging fundamental environment for Tesla.” This year, Tesla’s stock has fallen by a quarter, making it one of the worst performers on the S&P 500, despite Musk’s optimistic April forecast of increased sales. Cost-cutting measures, including mass layoffs affecting Tesla’s supercharging team, have done little to reassure investors.
Analysts are bracing for Tesla’s first annual sales decline this year. In the January-March period, deliveries dropped the most in nearly four years, falling short of Wall Street expectations. Sales have been particularly weak in Europe, dropping 36% in May due to reduced EV subsidies and declining demand from fleet operators, who accounted for nearly half of Tesla’s sales in the region last year. Reuters reported in May that Tesla was attempting to appease European leasing firms, whose fleet values were undermined by Tesla’s repeated retail price cuts, coupled with slow service and expensive repairs alienating corporate customers.
In China, competitors have introduced cheaper models, while Tesla has lagged in bringing new designs to the market. Musk indicated in April that Tesla would introduce new models, including affordable vehicles, later this year but provided no pricing details. While Tesla refreshed its Model 3 sedan late last year, it did so without a significant redesign. Its best-selling Model Y SUV, Model S premium sedan, and Model X SUV have not seen major updates in years.
Despite the current challenges, Tesla’s future plans hold promise. The company began deliveries of its Cybertrucks late last year, and while mass production is not anticipated until 2025 due to recalls and quality issues, this is a step towards the future. In May, Tesla omitted its goal of delivering 20 million vehicles annually by 2030 from its latest impact report, a notable shift from its long-term annual growth target of 50% for EV deliveries touted for years. However, Tesla plans to unveil robotaxis on August 8 as part of its strategy to increase the adoption of its ‘Full Self-Driving’ software. The potential of these future plans offers hope for Tesla’s trajectory.
