Despite its efforts to stimulate demand through price cuts, Tesla fell short of first-quarter delivery estimates due to increased competition and a pessimistic economic outlook. Although the electric-vehicle manufacturer’s deliveries were 36% higher than the previous year, they fell short of the 52% growth rate projected by CEO Elon Musk at the beginning of the year.
Investors have been closely monitoring Elon Musk’s strategy of cutting prices to boost sales, although they are concerned about the potential impact on profit margins. According to Refinitiv data, Tesla delivered a record-breaking 422,875 vehicles, which fell short of analysts’ expectations of 430,008 vehicles. “If they hadn’t implemented the price cuts, the outcome would have been worse. It indicates that the economy is becoming more challenging,” said Gene Munster, Managing Partner at Deepwater Asset Management on Sunday.
“They demonstrated growth, but it wasn’t as fast as what Elon had predicted.” Despite missing his own ambitious sales targets for Tesla in recent years, Musk stated in January that deliveries for 2023 could reach 2 million vehicles, up from 1.3 million in 2022, barring any external disruptions. In the first quarter of this year, Tesla delivered 6% more of its primary Model 3/Model Y vehicles than the previous quarter. However, the number of deliveries for its higher-priced Model X/Model S vehicles declined by 38%.
EV production
For the first quarter of this year, the car manufacturer produced 440,808 vehicles, exceeding the number of cars delivered. Tesla increased production at its new factories in Texas and Berlin, and China production recovered from the impact of COVID-19 lockdowns. Some analysts predict that Tesla may face pressure to reduce prices further due to competition from other automakers that have matched their cuts, and concerns about the weakening economy. The demand outlook is further clouded by the possibility of reduced U.S. electric vehicle subsidies for some models starting on April 18.
In January, after missing Wall Street’s delivery estimates for 2022, Tesla implemented a global price cut of up to 20%, which sparked a price war. The automaker’s price reductions in China also triggered a similar response from Chinese competitors such as BYD and Xpeng, who lowered prices to defend their market share amidst declining demand. During the first two months of this year in the world’s largest automobile market, the leading company BYD accounted for 41% of new energy car sales, while Tesla held an 8% share. Elon Musk cautioned that the possibility of a recession and rising interest rates may prompt the EV manufacturer to lower prices to maintain growth at the expense of profits. In January, Musk claimed that the price reductions had spurred demand.
