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Tesla Faces Another Quarter of Sluggish Sales Amid Rising Competition
Tesla Inc. is poised to report a second consecutive quarter of declining sales, echoing a trend not seen since 2012. Analysts predict the electric vehicle (EV) giant will announce the delivery of 439,302 vehicles for the second quarter, marking a 5.8% drop compared to the same period last year.
Challenges and Setbacks Met Head-On
Earlier in the year, Tesla encountered several hurdles, including a suspected arson at its Berlin factory and shipping diversions due to conflicts in the Red Sea. Having resolved these issues, the company is left with fewer reasons for its faltering sales beyond the aging lineup of its vehicles struggling to compete with newer models from other EV makers.
Tom Narayan, a global autos analyst at RBC Capital Markets, noted that Tesla's aging model lineup is facing stiffer competition, making growth more challenging. Despite CEO Elon Musk's efforts to boost demand through price cuts and attractive leasing options, the company’s sales slowed in the latter half of last year.
Staff Reductions and Impact on Deliveries
In April, Musk made significant staffing cuts, reducing more than 10% of Tesla’s workforce, including sales personnel. While this move may have helped conserve cash, it also likely influenced Tesla’s lower second-quarter delivery numbers. New EV customers often have numerous questions regarding battery range, charging infrastructure, and software features, areas where the reduced sales staff might have made a difference.
Stale Models and Slow Pickup Launch
Tesla's challenge to sustain the success of its Model Y, the world’s top-selling vehicle last year, is evident. The Model Y launched in 2020, and the Model 3 sedan hit the market three years earlier. Problems have also plagued the launch of Tesla’s first pickup, the Cybertruck, with multiple recalls involving issues like the accelerator pedal and windshield wiper.
Market Reactions and Future Prospects
Despite some analysts lowering their vehicle delivery estimates for Tesla in recent weeks, investor sentiment remains influenced by Musk's plans for introducing new models by late 2024 and the anticipated unveiling of a dedicated robotaxi in August. The company's shares, though down over 15% for the year, received a boost when shareholders re-approved Musk’s substantial $56 billion compensation package last month.
Looking Ahead
Ben Kallo, an analyst at Robert W. Baird, emphasized the significance of Tesla's second-quarter deliveries for its annual performance and the potential for growth in 2024. He expects Tesla to deliver around 435,200 units this quarter, with an annual total of approximately 1.83 million units, only a slight increase from 2023.
While Tesla has pledged to introduce new models by early next year, specifics remain scant, and the company has cautioned that growth in 2024 will be "notably lower." As stakeholders await the upcoming robotaxi announcement, Tesla's delivery numbers for Q2 are seen as crucial for the company’s near-term trajectory.
