TESLA: Q1 deliveries fall 8.5% to 386,810 as demand cools

Tesla Inc. reported first-quarter global deliveries of 386,810 for an 8.5 percent decrease from the same period last year, as the automaker faced fierce competition and softening electric vehicle demand in major markets, including the U.S.

Tesla blamed the sales crash on supply constraints for the freshened Model 3 sedan in the U.S. and geopolitical factors such as the attacks on shipping in the Red Sea region by Houthi militants in Yemen. But analysts said the biggest factor was waning demand for Tesla products, since overall vehicle production remained robust in the first quarter — at 433,371 — while deliveries fell for the first time in years.

"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 a statement Tuesday.

Tesla's Fremont, Calif., plant is its biggest in the U.S. Shares in Tesla slipped 5.4 percent in afternoon trading Tuesday.

“I think some of the excitement related to EVs has worn off,” said Gene Munster, managing partner at Deepwater Asset Management, who has a positive long-term outlook on Tesla. EV early adopters bought Teslas in 2022 and 2023, pulling demand forward and positioning 2024 and 2025 for slower growth, he said.

Another reason for the “ugly” Tesla delivery numbers is related to high interest rates, Munster said in a video post on the social media platform X. A third but smaller factor, Munster added, was negative consumer sentiment in the U.S. toward Tesla CEO Elon Musk, who posts his political views on the X platform, which he owns, on a near daily basis.

The last time Tesla sales dropped was in the second quarter of 2020, when the COVID-19 pandemic forced the automaker to shut down production.

The first quarterly decrease in deliveries in four years is also a sign that the effects of its price cuts are waning.

The company posted strong numbers last year, but 2024 is expected to be more challenging.

Industry analysts warn that Tesla's growth could flatten this year due to a cooling EV market in the U.S. and fierce competition around the globe. Musk said in January that its next growth wave won't come until late 2025 with a new, low-cost vehicle.

Cox Automotive estimated first-quarter Tesla sales in the U.S. at 166,734 for a 3.2 percent gain compared with the same quarter last year. That contrasts with overall EV growth of 15 percent and U.S. light-vehicle growth of 5.6 percent, regardless of fuel type, Cox said in a forecast last week.

"The EV slowdown is shaping up to be a Tesla slowdown," Cox analyst Stephanie Valdez Streaty said during a conference call Thursday.

Wall Street analysts who are generally bullish on Tesla have also been sounding the alarm.

"The biggest and most concerning issue for Tesla — and its investors — remains China as rising EV competition and a lingering price war has made this key market very challenging," analyst Dan Ives of Wedbush wrote in a research note last week.

Deutsche Bank forecast Tesla's 2024 deliveries at around 1.9 million vehicles, representing single-digit growth from 2023 sales of just over 1.8 million, the bank said last week, citing weakness in China.

In the U.S., Tesla is ramping up production of the Cybertruck pickup amid strong demand, but Musk said in October that he doesn't expect volume production of the stainless-steel truck until next year.

One of Tesla's challenges is a lack of fresh products, analysts say, with the exception of the wildly styled Cybertruck that may not achieve mass-market appeal once its novelty has worn off.

The Model 3 received a freshen in January, but the sedan still looks nearly the same as when it was introduced in 2017. The Model Y crossover, introduced in 2020, is due for a freshen in the next year or so, and the Model S sedan and Model X crossover haven't changed much in a decade.

"Tesla is facing the reality of being demand-constrained — and not supply-constrained — for the first time in its history," said Karl Brauer, executive analyst at iSeeCars. "Between ever-increasing competition, aging product and a general pullback in EV sales, the most successful car company of the past 10 years has to reconsider its long-term planning," Brauer told Automotive News last month.