Tesla experienced its first annual drop in sales since the start of the pandemic as competition from both Chinese and Western automakers increased. The company reported that it built 433,000 vehicles but only delivered 387,000, a decrease from previous quarters. In response to growing competition, Tesla has been cutting prices, which has impacted its profit margins, although it remains more profitable than traditional automakers. The decline in sales has caused Tesla’s stock price to fall, losing more than a third of its value this year.
Factors contributing to Tesla’s drop in sales include production issues at its Fremont factory, factory shutdowns due to various incidents, and increased competition in the EV space. In the fourth quarter, Tesla lost its title as the world’s best-selling maker of EVs to Chinese automaker BYD. However, despite the decline in sales, Tesla reclaimed the global title from BYD, which experienced an even bigger drop in sales. BYD reported a decrease in sales of pure battery-powered vehicles and a 13% increase in EV sales compared to the previous year.
In addition to competition from Chinese automakers, Tesla is also facing increased competition from legacy automakers in Western countries as they introduce new EV models. Toyota reported a 61% increase in pure EV sales for the first two months of the year, while General Motors experienced a 22% decrease in US EV sales due to discontinuing the Chevrolet Bolt. However, GM’s newer EV models saw a significant increase in sales, providing a bright spot in an otherwise disappointing quarter for the company.
Analysts had expected Tesla to sell as many as 440,000 vehicles, but the company fell short of expectations. Dan Ives, an analyst with Wedbush Securities, described the quarter as a “train wreck into a brick wall quarter” and raised concerns about Tesla’s sales in China, which he estimates fell by 3% compared to the previous year. While overall demand for EVs is still growing, the pace of growth has been slower than some forecasts, prompting traditional automakers to adjust their EV production plans.
Despite the challenges facing Tesla, Elon Musk remains optimistic about the company’s long-term prospects. The EV market continues to expand, with US EV sales rising 40% last year and surpassing 1 million vehicles for the first time. However, the company will need to address issues such as competition, production challenges, and fluctuating demand in order to maintain its position as a leader in the EV industry.