Tesla deliveries fall 5% but slightly exceed market expectations

Tesla reported a second consecutive decline in quarterly vehicle deliveries, as the world’s largest electric vehicle maker continues to suffer from slowing demand and stiff competition from cheaper Chinese rivals.

The company delivered 443,956 vehicles globally in the three months to June — down 4.7 per cent from a year earlier, but slightly above Wall Street expectations for 439,302. Sales rebounded from a disappointing 386,810 in the first quarter, helping push up the shares 8.5 per cent on Tuesday.

Tesla also retained its position as the world’s largest EV company. China’s BYD reported earlier the same day that second-quarter deliveries totalled 426,000 — a 21 per cent rise from the previous year. Investor focus has been on whether BYD could again overtake Tesla as it did in the last quarter of 2023.

“This was a huge comeback performance from Tesla and Musk . . . with EV demand still choppy globally,” said Wedbush analyst Dan Ives. “While it’s been a difficult period for Tesla, and the company has been through some significant cost reductions to preserve its bottom line/profitability, it appears better days are now ahead,” he added.

Tesla has had an eventful 2024 so far. Chief executive Elon Musk won two contentious votes at its annual meeting last month when shareholders reapproved his historic $56bn pay award — which had been struck down by a Delaware court — and backed a proposal to reincorporate the company in Texas.

Buoyed by his victories, Musk, who also runs SpaceX, social media platform X and artificial intelligence start-up xAI, is repositioning Tesla as a robotics and AI company. He has promised to unveil plans for a fully autonomous “robotaxi” on August 8.

Nevertheless, Tesla is slashing costs as it faces a new period of lower sales growth and margins after years of rapid expansion. Mainstream buyers remain sceptical of electric vehicles, which cost more to purchase, insure and repair. Tesla has not released a new vehicle in several years and rowed back plans for a new low cost model earlier this year.

Its stock has fallen 18 per cent in the past 12 months and the company’s market capitalisation has almost halved from its peak of $1.2tn in November 2021.

Adding to the troubles for Tesla is a consumer preference for cheaper hybrid models. Unlike legacy manufacturers, the EV maker does not make petrol or hybrid models it can fall back on. Meanwhile, its inventories are growing — increasing more than 136 per cent over the past two years.

The Austin-based company has had to slash purchase and lease prices on some of its models in the face of increased competition from Chinese rivals such as BYD. Musk also abruptly cut more than 10 per cent of Tesla’s staff in April, including the entire supercharger team that oversaw the company’s market-leading global network of fast-charging stations.

According to analysts at Jefferies, Tesla’s market share in EV has plateaued. Even though its software remains ahead of most “slow moving” peers, this is not the case in China. “A stagnant Tesla is a lesser threat to other manufacturers until EV demand accelerates again,” said Philippe Houchois in a note.

A bright spot was the energy storage business, which deployed 9,400 megawatt hours in the second quarter compared with 4,053 hours in the first three months of the year. The division manufacturers “Powerwall” batteries for individual homes and “Megapacks” for commercial businesses.

“Energy storage was exceptional, suggesting market share gains,” said RBC Capital Markets analyst Tom Narayan. “We actually attribute more value to it versus Tesla’s car business . . . Battery storage has a tremendous [potential market] and is already more profitable than its cars.”

Additional reporting by Gloria Li in Hong Kong