2024.04.03 01:10
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"Thought it would be bad, didn't expect it to be this bad!", Tesla falls from grace

Tesla's 2024 got off to a bad start, with a difference of nearly 50,000 vehicles in production and sales data. Inventory data confirms that Tesla may have a serious demand shortage issue. Analysts are alarmed, calling the first-quarter delivery volume an inexplicable disaster

Since the first quarter, Wall Street investment banks have repeatedly lowered their expectations for Tesla's delivery volume, but the data released shows that analysts' expectations were still too optimistic.

On April 2nd, Tesla announced the first-quarter car production and delivery volume report. Tesla's delivery volume decreased by 8.5% year-on-year to about 386,800 vehicles, a decrease of over 20% from the previous quarter, far below the analysts' previous expectation of 449,000 vehicles, setting a record for the largest deviation from expectations.

Wedbush analyst Dan Ives, who has a long-term positive outlook on Tesla, commented, "Although we expected delivery volume to be bad this quarter, this data is an inexplicable disaster."

In response to the decline in sales, Tesla stated that the production of the Model 3 refresh version at the Fremont factory in California was in the ramp-up phase in the first quarter of this year, logistics were disrupted due to intense competition, and the factory shutdown caused by the fire at the Berlin Gigafactory affected production and delivery volume.

Media analysis believes that the slowdown in consumer demand has become Tesla's biggest current concern, as high interest rates have kept potential car buyers on the sidelines, and fierce competition and inadequate charging infrastructure have made consumers reluctant to foot the bill.

Deutsche Bank analyst Emmanuel Rosner stated that Tesla's first-quarter production was 433,000 vehicles, with a difference of nearly 50,000 vehicles between production and sales. Inventory data confirms that, in addition to known production bottlenecks, Tesla may also have serious demand issues.

Affected by this news, Tesla's stock price plummeted by 4.9% on the same day. Due to market concerns that Tesla has lost its growth momentum, its stock price has fallen by nearly 33% this year, evaporating over $260 billion in market value.

Tesla's Sales Dilemma

With the increasing competition in the global new energy vehicle market, Tesla faces competition from multiple brands such as BYD in the Chinese market. In Europe, traditional car manufacturers like Volkswagen and BMW have launched more attractive electric vehicle models. In the U.S. market, Tesla is facing pressure from the slowdown in demand for electric vehicles, as consumers prefer hybrid models.

The sales in the Chinese market have always been seen as an important part of Tesla's global sales, but recently there has been a downward trend.

According to data from the China Passenger Car Association, Tesla's wholesale sales in China in March this year were 89,100 vehicles, totaling 220,900 vehicles in the first quarter, slightly lower than the 229,300 vehicles in the same period last yearAccording to reports, BYD's sales of pure electric vehicles, plug-in hybrid vehicles, and other environmentally friendly vehicles in the first quarter were 626,263 units, an increase of 13% compared to the same period last year.

Analysis suggests that Tesla's two models, Model 3 and Model Y, are reaching the late stage of their lifecycle, and their product competitiveness is being surpassed by Chinese automakers.

According to Tesla's plan, the new entry-level model will start mass production at the Texas factory by the end of next year, followed by the Mexico factory and then the Shanghai factory. Therefore, the new model will not be launched in the Chinese market until at least the first half of 2026.

This means that in the next two years, Tesla will have to rely on its current models for sales in the fiercely competitive Chinese market. How to deal with the competition from Chinese new energy leader BYD and many new players will be the biggest challenge Tesla China faces.

Deutsche Bank analyst Rosner believes that although Tesla's price reduction strategy in the Chinese market may boost sales in the short term, it will continue to put pressure on profit margins and earnings in the long run, with diminishing effects:

Although Tesla has announced price increases in the US and China starting from April, we believe this is to boost March sales rather than a sign of strong demand.

In the US market, Tesla is facing a cooling market and pressure from hybrid models. The growth of the US electric vehicle market slowed down in the fourth quarter of last year, with year-on-year growth declining from 49% in the third quarter to 40%, lower than the 52% in the same period of 2022.

On one hand, the weak charging infrastructure has become a significant factor hindering the popularization of electric vehicles in the US. As of December 2023, the US only had 165,000 public charging stations. On the other hand, the significant slowdown in US electric vehicle demand is also being squeezed by hybrid vehicles.

Among the top ten best-selling new energy vehicles in the US last year, only three were pure electric vehicles, including Model Y, Model 3, and Chevrolet Bolt. Hybrid models accounted for seven, with Honda and Toyota occupying six spots. While pure electric vehicle sales only grew by 40% at the end of last year, hybrid vehicle sales increased by 75%, showing a stark contrast.

Analyst Colin Langan from Wells Fargo previously predicted that Tesla's core issue is that its once strong growth capability has waned, with multiple price cuts to stimulate demand yielding minimal results, and revenue and profit growth rates slowing significantly. Tesla's sales volume will be flat this year, and by 2025, the situation will worsen with sales declining. He lowered Tesla's target price from $200 to $120, implying a further 30% drop in the stock price.

Some investors also believe that Tesla's current sales dilemma is mainly caused by Elon Musk's personal actions. Ross Gerber, a well-known Tesla investor and CEO of Gerber Kawasaki Wealth and Investment Management, commented in X that to "save" Tesla, the Tesla board needs to be immediately replaced with independent directors, and only Musk himself needs to take responsibility for this