Tesla Inc. shares are set to mark their best-ever start to a year, buoyed by price cuts across the electric-vehicle maker’s lineup in a bid to boost sales. Investors will soon discover if all the enthusiasm was justified.
The Elon Musk-led carmaker is expected to announce quarterly delivery and production figures in early April, providing an initial glimpse into how well the company’s strategy of chasing volume over profit margins worked.
Analysts surveyed by Bloomberg expect the Austin, Texas-based company to deliver a record 421,164 cars globally in the first quarter of 2023, up from the 405,278 it delivered last quarter.
“In recent months Tesla has pivoted from being supply constrained to being demand constrained,” Barclays analyst Dan Levy wrote in a note to clients, adding that while concerns about demand “temporarily halted when Tesla cut prices in early January, questions have resumed of late.”
The company missed delivery estimates in 2022 and claimed to still be working through logistical issues as production exceeded sales for three straight quarters last year. In the fourth quarter, it produced 34,000 more cars than it delivered, raising questions about demand. The company’s stock plunged 65% in 2022 as Musk sold Tesla shares to finance his $44 billion purchase of Twitter Inc.
Tesla slashed prices first in China and then in the U.S. and Europe in January. Like the rest of the auto industry, the EV leader is grappling with inflation and high interest rates that make it more expensive for consumers to finance large purchases. The implosion of Silicon Valley Bank has also spooked the tech scene in California, a key part of Tesla’s customer base.
Other carmakers have since followed Musk’s strategy. Tesla’s cuts pushed Ford Motor Co. to lower the price of its electric Mustang Mach-E.
Even though the cuts will put a squeeze on Tesla’s profits, its stock has been on a strong rally since then. Shares have risen 59% this year as of Thursday’s close amid hopes the lowered prices would provide a much-needed boost to demand. Analysts and investors have also pointed out that Tesla’s sizable margins give it an edge over rivals.
“Tesla cut prices in early 1Q, temporarily spurring demand,” said Levy, the Barclays analyst, adding that the bank still expected further cuts due to a weak macroeconomic outlook and moves by other automakers. “Moreover, with Tesla likely to continue ramping production at both Austin and Berlin, additional supply is likely to drive further price cuts.”
The analyst expects Tesla to deliver 425,000 cars this quarter.
Tesla made and delivered more than 1.3 million cars in 2022 and has said it will make between 1.8 million and 2 million vehicles this year.
The company sells its cars to consumers directly, with many ordering their vehicles through Tesla’s website. Similarweb Ltd, an Israeli web analytics company, predicts Tesla will see strong deliveries in the first quarter based on web traffic. Tesla makes the Model S, X, 3 and Y, with the 3 and Y accounting for the vast majority of sales.
“Similarweb data on converted visits shows a huge spike in January (Model Y up 440%) and February (Model Y up 254%), on a year-over-year basis,” said Jim Corridore of Similarweb in an email interview. Similarweb tracks website visits per unit sold.
Tesla has a long history of going all-out at the end of the quarter, with Tesla employees from across the company pitching in to help hand over cars to customers. On the last earnings call in January, Musk said that “demand will be good despite probably a contraction in the auto market as a whole.”
“Price really matters,” said Musk on the earnings call. “There’s a vast number of people that wanted to buy a Tesla car, but can’t afford it. And so, these price changes really make a difference for the average consumer.”
