Tesla’s sales hit biggest ever drop, electric vehicles suffer brutal blow

(Bloomberg) — As the first quarter winds down, Wall Street analysts at Tesla Inc are second-guessing their models and slashing their forecasts for vehicle deliveries.

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Their cuts don’t go far enough.

The automaker led by Elon Musk delivered just 386,810 vehicles in the first three months of the year, below Bloomberg’s average estimate and the largest gap ever in seven years of data. Tesla shares fell 4.9% in New York on Tuesday, extending their 2024 decline to 33%, the second-highest rate in the S&P 500.

Numerous red flags emerged throughout the quarter. First, Tesla warned that growth would be “significantly lower” this year, blaming rising interest rates for keeping many consumers from buying its cars even as the company slashed prices. The company’s factory outside Berlin suffered multiple disruptions. Musk’s inflammatory posts on X turned off potential buyers, and China’s EV market became even more cutthroat.

Despite these apparent headwinds, most still expected Tesla to sell more cars than a year ago, but deliveries ended up down 8.5%.

“It’s ugly no matter what,” said Gene Munster, managing partner at Deepwater Asset Management. “Demand is weak. Interest rates are still high. Will Elon’s brand hurt Tesla?” To boost sales in the U.S.? This is directionally negative.”

Read more: China’s ultra-cheap electric cars are giving America a headache

Tesla blamed some of the sales decline on its switch to an upgraded Model 3 sedan, which along with the Model Y sport utility vehicle accounted for 96% of deliveries in the quarter. The arson attack disrupted its production in Germany for several days.

Still, Tesla produced 46,561 more cars than it delivered to customers this quarter, one of the largest mismatches in the company’s history.

“In addition to known production bottlenecks, there may be serious demand issues,” Deutsche Bank analyst Emmanuel Rosner, who has a buy rating on Tesla shares, wrote in a note. “He has lowered delivery expectations twice in just a few years. More than two weeks before the automaker unveiled the product, the company’s sales were still overestimated by more than 24,000 units.

Tesla does not report quarterly vehicle sales by region, but the United States and China have long been its largest markets. The company produces Model S, X, 3 and Y in Fremont, California, and Model 3 and Y in Shanghai. It also builds the Model Y at factories outside Austin and Berlin.

Musk added to the product line late last year with the launch of the stainless steel-cased Cybertruck. The company has not disclosed how many pickup trucks it will produce and deliver, lumping it in with other models including the S and X. Tesla’s rental car deliveries remain relatively sluggish compared with past quarters.

Despite the challenges, Tesla has managed to regain its title as the world’s largest seller of electric vehicles, taking back the lead from China’s BYD. In the first quarter, BYD delivered 300,114 pure electric vehicles globally. Including plug-in hybrids, the company sold 626,263 vehicles.

–With assistance from Catherine Larkin, Chester Dawson, Anne Cronin, and Craig Trudell.

(Updates closing price in third paragraph.)

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