Tesla’s awful quarter has Wall Street on edge ahead of delivery numbers

It
was
a
brutal
first
quarter
for


Tesla
investors.

Shares
of
the
electric
vehicle
maker
plunged
29%
in
the
first
three
months
of
the
year,
the
worst
quarter
for
the
stock
since
the
end
of
2022
and
the
third
worst
since
Tesla
went
public
in
2010.
It
was
also
the
biggest
loser
in
the
S&P
500.

Chief
among
concerns
on
Wall
Street
is
Tesla’s
core
business.
The
company
is
poised
to
report
first-quarter
vehicle
production
and
deliveries
in
coming
days,
and
even
bulls
are
expecting
sluggish
results,
despite
price
cuts
and
incentives
for
buyers
dangled
throughout
the
quarter.

As
of
Thursday,
the
last
trading
day
of
the
quarter,
analysts
were
expecting
around
457,000
deliveries
for
the
period,
according
to
the
average
of
11
analyst
estimates
compiled
by
FactSet.
That
would
mark
an
increase
of
8%
from
422,875
a
year
earlier.
Estimates
for
the
quarter
ranged
from
414,000
to
511,000
deliveries.

Analysts
who
updated
their
numbers
in
March
were
the
most
bearish,
with
their
estimates
ranging
from
414,000
to
469,000.
Independent
autos
industry
researcher “Troy
Teslike”
expects
the
company’s
deliveries
to
come
in
below
even
the
lowest
estimate
captured
by
FactSet.

Deliveries
are
the
closest
approximation
of
sales
reported
by
Tesla
but
are
not
precisely
defined
in
the
company’s
shareholder
communications.

Here
are
four
major
reasons
for
Tesla’s
first-quarter
slide.

In
China,
there’s
competition
from
an
onslaught
of
fully
electric
vehicles,
including
new
models
that
cost
less
than
Tesla’s
popular
Model
Y
SUV
and
Model
3
sedan.

To
end
2023, China’s
BYD
dethroned
Tesla
as
the
world’s
top
EV
maker.
In
the
first
quarter
of
this
year,
BYD
kept
up
the
pressure,
launching
its
Qin
Plus
EV
at
a
starting
price
of
around
$15,200,
followed
by
its

BYD Seagull,
a
small
all-electric
hatchback
with
a
starting
price
below
$10,000.

Chinese
smartphone
company
Xiaomi
is
getting
in
the
game
with
its
first
vehicle,
a
fully
electric
SUV
that
costs
far
less
than
Tesla’s
entry-level
Model
3
sedan.
Xiaomi
CEO
Lei
Jun
said
the
standard
version
of
the
SU7
will
sell
for
the
equivalent
of
$30,408
in
China,
a
price
he
acknowledged
would
mean
the
company
is
losing
money
on
each
sale.
Tesla’s
Model
3
is
about

$4,000
more
than
that. 

Tesla
slashed
prices
in
response,
but
sales
were
still
sluggish.

According
to
data
from
the
China
Passenger
Car
Association,
Tesla
sold
71,447
of
its
China-made
cars
in
January,
including
39,881
sold
domestically,
representing
a
drop
from
December.
The
numbers
slid
again
in
February
to
60,365
China-made
Teslas,
including
exports.

As
sales
dipped,
Tesla
reduced
production
at
its
Shanghai
factory,
shifting
staffers
from
working
six
and
a
half
days
to
week
to
five
days,
Bloomberg

first
reported.

Tesla
didn’t
offer
guidance
for
2024
in
its

earnings
call
in
January,
but
analysts
see
Tesla’s
China
struggles
as
a
harbinger
for
a
rough
quarter,
if
not
full
year.

Deutsche
Bank
analyst
Emmanuel
Rosner
lowered
his
price
target
on
Tesla
this
week,
citing
weaker-than-expected
China
sales
and
the
company’s
recent
plan
to
cut
production
in
the
region.
Rosner
is
now
expecting
Tesla
to
report
deliveries
of
414,000
for
the
first
three
months
of
2024,
and
is
predicting
just
mid-single-digit
growth
for
the
year
from
Tesla.

Red
Sea
attacks,
activist
clashes
in
Europe

There
was
also
drama
in
Europe.

Tesla
and
other
manufacturers
like
Volvo
suspended
some
production
on
the
continent
in
January
due
to
a
shortage
of
components
following
attacks
on
shippers
in
the
Red
Sea.
Iran-backed
Houthi
militia
attacks
have
continued
to
disrupt
one
of
the
world’s
busiest
routes.

Then
in
March
came
a
dramatic
protest
by
environmentalists
in
Germany.
Objecting
to
Tesla’s
plans
to
expand
the
footprint
of
its
car
and
battery
factory
in
Brandenburg,
outside
of
Berlin,
the
protesters
set
fire
to
electrical
infrastructure
near
the
Tesla
plant.
While
the
fire
didn’t
spread
to
the
factory,
it
left
the
facility
without
sufficient
power
for
operations,
forcing
a
temporary
suspension
in
production.

CEO
Elon
Musk

visited
the
German
factory
after
the
attack
to
reassure
employees.
He
also
called
the
protest “extremely
dumb.”
Tesla’s
head
of
policy,
Rohan
Patel,
wrote
on
X
that
Tesla’s
mission
is
to “create
zero
emissions
products”
but
to
do
that
well, “we
also
focus
on
creating
the
most
sustainable
factories
along
with
a
culture
to
do
the
right
thing
in
our
community.”

Meanwhile,
in
Nordic
countries,
Tesla
service
technicians
and
other
workers
have
been
on
strike
in
support
of
the

Swedish
labor
union
IF
Metall.
The
labor
group
has
been
pressuring
Tesla,
since
October
2023
to
negotiate
and
sign
a
collective
bargaining
agreement
with
its
workers.

IF
Metall’s
website
says
that
nine
out
of
10
workers
are
union
members
in
Sweden,
yet
Tesla
has
resisted
unions,
as
it
consistently
does
in
the
U.S.,
and
rebuffed
IF
Metall’s
efforts
to
negotiate.

Aging
lineup,
early
days
for
Cybertruck

While
EV
sales
are
still
gaining
popularity
worldwide,
the
growth
rate
has
slowed.
And
with
Tesla
no
longer
the
dominant
player,
every
new
product
becomes
more
crucial.
There’s
not
a
lot
in
the
hopper.

The
Cybertruck
is
still
in
its
very
early
days
and
has
a
niche
audience.
The
company
began
delivering
the
angular,
unpainted
steel
model
of
the
truck
in
December
at
a
promotional
event
in
Austin,
Texas.

Musk
previously
stated
on
an
earnings
call
that
Tesla “dug
its
own
grave,”
with
the
sci-fi
inspired
Cybertruck.
In
an
interview
with
Tesla
fan
and
auto
critic
Sandy
Munro
in
late
2023,
Musk
cautioned
that
the “Cybertruck
is
not
something
that
will
be
material
to Tesla’s
financials”
in
2024,
and “will
probably
be
material
in
2025.”

Tesla
has
been
gearing
up
production
of
its
refreshed
Model
3,
known
as
the
Highland,
in
Fremont,
California.
Forbes’
Larry
Magid
wrote, “Visually,
the
changes
on
the
outside
are
subtle.”
He
also
disliked
Tesla’s
controversial
design
decision
to
omit “stalks”
from
sides
of
the
steering
wheel.
Highland
drivers
use
buttons
and
on-screen
controls
to
shift
between
drive,
reverse
and
park
or
to signal
a
turn
or
lane
change.

Tesla
does
have
a
totally
new
platform
in
the
works,
a
more
affordable
EV
that
fans
refer
to
as
the “Model
2.”
But
it
won’t
be
delivered
to
customers
for
years.

Musk
has
continued
to
bet
that
Tesla
customers
and
shareholders
will
stick
with
the
company
regardless
of
his
increasingly
incendiary
rhetoric
on
X
and
beyond.

Earlier
this
month,
Musk
met
with
former
President

Donald
Trump
in
Florida.
He’s
called
for
a “red
wave”
in
upcoming
U.S.
elections,
and
he’s
shared,
liked
or
otherwise
promoted
far-right
accounts
and
content
on
X,
where
he
now
has
178.8
million
listed
followers.
He
has
repeatedly
disparaged
undocumented
immigrants,
ranted
against
corporate
diversity
initiatives
and
made
absurd
claims
that

migrants
from
Haiti
are
cannibals.

Musk’s
political
ideology
stands
at
odds
with
groups
of
people
most
likely
to
buy
his
products.
Proponents
of
electric
vehicles
tend
to
be
left-leaning
ideologically,
according
to
research
from

Pew
Research
and

Gallup
last
year.

Musk
has
also
wagered
that
Tesla
shareholders
and
its
board
of
directors
will
follow
his
lead.
In
February,
Musk
said
he
would
move
for
a
shareholder
vote
to
transfer
Tesla’s
site
of
incorporation
to
Texas
from
Delaware,
after
a
judge
in
Delaware
voided
the

$56
billion
pay
package
that
he
was
granted
in
2019
on
grounds
that
the
board
failed
to
prove “the
compensation
plan
was
fair.”

Before
the
ruling,
Musk
had
begun
pressuring
shareholders
and
the
Tesla
board
to
give
him
more
control
of
the
EV
maker.

“I
am
uncomfortable
growing
Tesla
to
be
a
leader
in
AI
&
robotics
without
having
~25%
voting
control,”
Musk
wrote
in
a
post
in
January.

Investor
Ross
Gerber,
a
longtime
Tesla
bull,
called
the
demand
tantamount
to “blackmail”
in
an

interview
with
CNBC.

It
all
adds
up
to
over
$230
billion
in
lost
market
cap
for
Tesla
and
its
shareholders
since
the
calendar
turned
to
2024.
That
made
for
a
very
lucrative
quarter
for
short
sellers,
who’ve
been
expecting
such
a
downturn.

According
to
data
from
S3
Partners,
Tesla
shorts
are
up
more
than
$5.77
billion
in
2024,
making
it
the
most
profitable
name
in
the
U.S.
Short
interest
at
the
end
of
trading
on
Thursday
was
about
3.76%
of
float,
representing
$18.71
billion
in
notional
value.

Altimeter
Capital’s
Brad
Gerstner
is

buying
the
dip.
Gerstner
told
CNBC
this
week
that
the
company
is
now
making “massive
progress
at
an
accelerating
rate”
on
its
self-driving
technology
efforts.

Musk
has
been
making
such
pronouncements
for
years.
In
2015,
he
told
shareholders
that
by
2018
Tesla’s
cars
would
achieve “full
autonomy,”
and
be
able
to
drive
themselves.
In
2016,
he
said
Tesla
would
able
to
send
one
of
its
cars
on
a
cross-country
drive
without
requiring
any
human
intervention
by
the
end
of
the
following
year.

Tesla
still
has
yet
to
deliver
a
robotaxi,
autonomous
vehicle
or
technology
that
can
make
its
cars
into “level
3”
automated
vehicles.
However,
Tesla
offers
advanced
driver
assistance
systems
(ADAS),
including
a
standard
Autopilot
option,
or
premium
Full
Self-Driving “FSD”
option,
the
latter
of
which
costs
$199
a
month
for
subscribers
in
the
U.S.
or
$12,000
up
front.

In
a
push
for
end-of-quarter
sales,
Musk

recently
mandated
that
all
sales
and
service
staff
install
and
demo
FSD
for
customers
before
they
hand
over
their
cars.
He
wrote
in
an
e-mail
to
employees, “Almost
no
one
actually
realizes
how
well
(supervised)
FSD
actually
works.
I
know
this
will
slow
down
the
delivery
process,
but
it
is
nonetheless
a
hard
requirement.”

Despite
its
name,
Tesla’s
premium
option
requires
a
human
driver
at
the
wheel,
ready
to
steer
or
brake
at
any
moment.

WATCH:

Tesla
is
going
through
a ‘code
red
situation’