What You Need to Know About Tesla's Underwhelming Delivery Numbers and Share Price Decline

Following the report, Tesla's stock price fell by about 5%.

Although Tesla does not specify sales by model, the report indicated that the company produced 412,376 Model 3/Y vehicles and delivered 369,783, while producing 20,995 of its other models and delivering 17,027.

For comparison, in the same quarter of the previous year, Tesla achieved 422,875 deliveries and 440,808 in production. The fourth quarter of 2023 saw higher numbers, with 484,507 deliveries and 494,989 vehicles produced.

Tesla uses deliveries as a proxy for sales, but the exact definition of this metric is not clearly outlined in the company's communications to shareholders.

Analysts had anticipated Tesla would deliver approximately 457,000 vehicles for the quarter ending March 31, according to an average of 11 estimates by FactSet. The range of predictions varied widely, with the highest at 511,000 deliveries and the lowest at 414,000. Updated estimates in March narrowed this range to between 414,000 and 469,000 deliveries.

Wedbush Securities analyst Dan Ives said he remains bullish long-term, he called the quarter "a train wreck into a brick wall quarter."

Tesla's recent decline in sales is attributed to several factors: the production ramp-up of the updated Model 3 in Fremont, factory shutdowns due to diverted shipping routes from China to Europe, and a temporary closure of its German factory following an arson attack.

Increased competition in the EV market is also affecting demand, with Tesla briefly losing its title as the world's top EV seller to BYD in Q4. However, despite a significant sales drop, Tesla has regained its global lead after BYD saw an even larger decrease in EV sales, excluding hybrids. BYD's pure EV sales did increase by 13% year-over-year, contrasting Tesla's decline. Additionally, Tesla is contending with emerging competition from established automakers in the West, who are launching new EVs amid a broader transition from combustion engines to electric vehicles.

Deutsche Bank has maintained a Buy rating on Tesla shares with a price target of $200, down from a previous $218. The firm is concerned about the gap between Tesla's production and delivery numbers, which falls short of even conservative estimates. This suggests a potential excess inventory of 46,000 units, hinting at possible demand issues rather than just production constraints.

The bank points to demand struggles in the U.S. as the main reason for the delivery shortfall and warns of potential negative impacts on gross margin due to the lower volumes. Despite recent price hikes by Tesla in the U.S. and China, Deutsche Bank believes the company may need to review its pricing strategy to address the demand and pricing challenges ahead.

Tesla has slashed prices in response to rising competition. Despite its higher profitability compared to conventional car manufacturers, these reductions are compressing the profit margins that previously elevated its stock value. The anticipation of future sales growth has also been a pillar of Tesla's high stock price, securing its status as the most valuable automaker globally.

Tesla's recent discounts and incentives haven't boosted sales as much as before. At the end of the first quarter, CEO Elon Musk instructed sales and service employees to showcase the latest version of Tesla's advanced driver-assist system, marketed as Full Self-Driving, to North American customers. However, despite its name, the system isn't fully autonomous and still requires an attentive driver.