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Tesla (TSLA) on Sunday reported Q1 vehicle deliveries of 422,875, up about +4% from Q4 and just above the consensus of 421,164. However, the stock is down more than -5% today on disappointment that sales were not even higher, especially after the company slashed prices across its vehicle lineup. Also, concerns are mounting that Tesla’s price cuts may eat into profit margins and that inventories may rise as the company has been boosting vehicle output at its new plants in Germany and the U.S.
In late January, Tesla CEO Musk said that orders for new cars were running at almost twice the production rate after the company cut prices of its top-selling Model Y by as much as 20% and discounted its most expensive models by tens of thousands of dollars. However, Sunday’s report showed a slowdown in sales as the quarter ended, with vehicle production outpacing sales by almost 18,000 vehicles.
Despite reporting slightly better-than-expected Q1 vehicle deliveries, some analysts are concerned that the recent ramp-up in vehicle production may lead to excess inventories if demand craters. Jeffries said, “continued excess production over deliveries will keep the debate going on price elasticity versus general demand weakness.”
Even though Tesla continues to outpace other automakers in global electric vehicle (EV) sales, it is facing stiffer competition from China’s BYD Co, with some analysts predicting the company this year will challenge Tesla for the number one EV volume leader. BYD Co, China’s top EV maker, reported 2022 EV sales of 911,000, up sharply from 321,000 in 2021. Tesla has cut its vehicle prices to keep its volume growing, forcing BYD to follow suit in February to keep pace. As a result, BYD Co reported Sunday that its March new EV sales jumped +97% y/y to 207,080 units.
If the economy starts to struggle, it may thwart Tesla’s ability to keep growing at an accelerated pace. Last year, it fell short of its target for a 50% average annual increase in vehicle deliveries, expanding by only 40%. Its growth rate in Q1 of this year slipped to 36%. Deepwater Asset Management said, “Telsa deliveries were in line with the consensus numbers, but it was a disappointment relative to some of the whisper numbers.”
Tesla in Q1 delivered only 10,695 Model S sedans and Model X sport utility vehicles, its most expensive models. That’s the lowest total for those vehicles since Q3 of 2021, despite price cuts for the vehicles in January and early March. Some analysts are concerned that Tesla’s price cuts may eat into company profits. Robert Baird said, “people will switch very quickly to talking about what the margins will be for the first quarter. There’s been a lot of focus on price cuts hurting margins.”
