Tesla deliveries hit record but fall short of Musk’s aspirations According to Reuters


© Reuters. FILE PHOTO: The Tesla logo is seen at the opening ceremony of the Tesla Shanghai Gigafactory in Shanghai, China January 7, 2019. REUTERS/Aly Song/File Photo

By Akash Sriram and Hyunjoo Jin

SAN FRANCISCO (Reuters) – Tesla (NASDAQ: ) is expected to post another record quarter in electric vehicle (EV) deliveries, likely ahead of the ambitious internal target of 2 million a year that Chief Executive Elon Musk touted at the start of the year.

Faced with slowing sales, Tesla used its leading margins in 2023 to slash prices of its four car models globally, with a focus on China, where the company has lost market share to locals including BYD ( SZ: ).

But a price war and slowing demand for EVs have prompted automakers including Ford Motor (NYSE: ) to back off on their electrification plans, leaving Tesla as the undisputed leader in the United States, and its stock has more than doubled this year.

“The fourth quarter is typically the strongest of the year in terms of deliveries for Tesla, and we expect that to continue this year,” said Garrett Nelson, principal analyst at CFRA Research.

Tesla is likely to deliver 1.82 million vehicles worldwide in 2023, up 37% from 2022, with about 473,000 units in the fourth quarter, according to 14 analysts polled by LSEG.

In January, Musk said Tesla had the potential to reach 2 million deliveries this year, barring “crazy force majeure.” Back in October, however, he warned that higher borrowing costs were putting pressure on demand.

The company, which boosted sales at the end of the year by increasing discounts on its key models, said it aims to achieve a 50% average annual growth rate over several years.

In 2024, the electric car market leader will have to contend with the loss of federal tax credits for some of its cars in the United States, as well as in Germany, where the government is ending its electric car subsidy program early.

That may force further price cuts next year, even as interest rates and battery additive costs are expected to drop.

Jairam Nathan, an analyst at Daiwa Capital Markets, cut his estimate for Tesla’s deliveries next year to 2.04 million from 2.14 million and said he was modeling a 4% decline in average revenue per car from 2023.

2024 CHALLENGES

The company is also facing increased regulatory scrutiny of its self-driving systems and other parts in the United States and some European countries. Earlier this month, Tesla recalled nearly all of its 2 million vehicles on U.S. roads to install new safety devices.

Musk has previously said he believes full self-driving (FSD) could one day account for most of Tesla’s value.

Analysts polled by Visible Alpha expect 2.2 million Tesla deliveries next year. Most believe the newly released Cybertruck and updated Model 3 are not enough to boost demand.

“Tesla has openly admitted that the company is now in a transitional period of low growth,” Deutsche Bank analyst Emmanuel Rosner wrote in a note, referring to a meeting with director of investor relations Martin Viecha.

Investors expect Tesla’s margins to remain under pressure as the company ramps up Cybertruck production and prepares to launch a lower-cost car platform.

Musk said Cybertrucks will make up a small percentage of the vehicles Tesla makes next year and that there are “enormous challenges” in achieving mass production of the pickup truck, whose controversial design has divided fans.

RBC Capital Markets analyst Tom Narayan said in a report that the Cybertruck will account for 3% of Tesla’s volumes in 2024, calling it more of a “halo” product that could attract consumers to the brand.