Tesla sales drop as competition in the electric vehicle market heats up
Tesla sales fell sharply last quarter as competition in the electric vehicle market increased worldwide and price cuts the company enacted months ago failed to entice more buyers.
The Austin, Texas, company owned by Elon Musk, said Tuesday it delivered 386,810 vehicles from January through March, almost 9% below the 423,000 it sold during the same period last year. The company blamed the decline in part on phasing in an updated version of the Model 3 sedan at its Fremont, California factory. Plant shutdowns due to shipping diversions in the Red Sea, and an arson attack that knocked out power to its German factory also caused fewer deliveries, it said.
Last year, Tesla dramatically lowered prices by up to $20,000 for some models. In March, it temporarily knocked $1,000 off the Model Y, its top-selling vehicle. The reductions cut into the company's profit margins, which spooked investors.
The drop in Tesla's sales marks the first time its number of vehicle deliveries has fallen since 2020, the Wall Street Journal reported. The company's poor performance last quarter "was an unmitigated disaster that is hard to explain away," Wedbush Securities analyst Dan Ives said Tuesday.
In its letter to investors in January, Tesla predicted "notably lower" sales growth this year. The company added that it's between two big growth waves — one from global expansion of the Models 3 and Y; and one from the Model 2, a new smaller and less expensive vehicle.
"For Musk, this is a fork-in-the-road time to get Tesla through this turbulent period, otherwise troubling days could be ahead," Ives said. "With the ongoing debacle around margins, production and ongoing macro events, Musk will need to quickly take the reins back in to regain confidence in the eyes of Wall Street with a big few quarters ahead."
Automakers around the globe have indeed rolled out EVs aimed at competing with the likes of Tesla's Model Y and Cybertruck. As more Americans grow curious about owning EVs, companies like Ford and General Motors are investing billions of dollars to produce vehicles that are less expensive than Tesla cars. Between 2018 and 2020, Tesla accounted for 80% of EV sales in the U.S., but that figure fell to 55% in 2023, according to Cox Automotive.
A record 1.2 million EVs were sold in the U.S. last year, according to Cox data. A semiconductor chip shortage three years ago kept some major automakers from running their EV factories at full capacity, but those woes have dissipated and companies are starting to rev up production, auto experts said.
During the quarter, Tesla lost production time in Germany after what is suspected to have been an arson attack cut its power supply. U.S. production was slowed by an upgrade to the Model 3, and Ives estimated that Tesla's China sales slid 3% to 4% during the period.
Deliveries of the Models 3 and Y, which are by far Tesla's top sellers, fell 10.3% year over year to 369,783. Sales of the company's other models, the X and S and the new Cybertruck, rose almost 60% to 17,027. Tesla produced 10% more vehicles than it sold during the first quarter.
—The Associated Press contributed to this report.
