Tesla is worried about Wall Street

Tesla is worried about Wall Street

  • Many analysts cut their estimates as quarter came to a close
  • Several are bracing for a first sales decline in four years

Tesla Inc. may be headed for a gloomy milestone as waning demand for electric vehicles and elevated interest rates take a toll on sales.

Analysts rapidly lowered their projections for this week’s deliveries report as the quarter came to a close. Some on Wall Street are even braced for Tesla’s first sales decline since the early days of the pandemic.

On average, analysts surveyed by Bloomberg estimate that Tesla delivered 453,964 vehicles in the quarter. That would be down more than 6% from the company’s record showing in the fourth quarter, which tends to be the best time of year for sales. The key will be delivering more cars than the 422,875 managed in the first three months of 2023 and avoiding a first year-over-year drop since the second quarter of 2020.

Elon Musk may not have helped matters in the final week of March. The chief executive officer imposed a new directive that he acknowledged would slow the sales process, requiring that every customer in North America be taken for short drives to test out the driver-assistance feature Tesla misleadingly markets as Full Self-Driving.

Tesla started offering a free one-month trial of the feature, which otherwise costs $199 a month as a subscription or $12,000 to purchase. This was one of several perks the company dangled to entice consumers, along with temporary $1,000 discounts and free supercharging. Tesla also stepped up advertising on Google and X, the social media service Musk owns.

Musk warned investors in January that the company is “between two major growth waves.” The first was fueled by the Model 3 sedan and Model Y sport utility vehicle, and the next is expected from the launch of a cheaper next-generation vehicle slated to start production late next year.

With that next-gen car a ways off, some analysts fear that Tesla’s outlook for a “notably lower” growth rate this year may actually manifest in no growth at all in the first quarter.

Emmanuel Rosner of Deutsche Bank cut his deliveries estimate twice in the matter of just over two weeks last month. He now expects the company sold around 414,000 cars in the quarter, down about 2% from a year ago.

“We think worries over volume and earnings could further dampen investor sentiment and put significant pressure on the stock,” Rosner wrote in a March 28 report. Tesla shares have slumped 29% already this year, the worst showing on the S&P 500 Index.

The company suffered several setbacks in the quarter, including multiple shutdowns of its plant outside Berlin. It also changed over its factory in California to make an upgraded version of the Model 3, which tends to slow output.

In China, Tesla is struggling to keep pace with BYD Co., which became the world’s top-selling EV maker at the end of last year. The US carmaker instructed employees at its Shanghai facility last month to lower production by working five days a week instead of the usual 6 1/2 days, people familiar with the matter told Bloomberg News.

The Model 3 and Model Y accounted for 96% of Tesla’s global deliveries last year. The company also makes the Model S sedan and Model X SUV and started selling the Cybertruck late last year, though it has yet to break out sales for that vehicle.

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