Tesla Q1 Deliveries: Look Out Below
Q1 Deliveries trailed plunging market consensus, my even lower number, and Tesla's expectations as sales crashed while it overproduced to a new record cumulative excess inventory which jumped 70% y/y
Tesla (TSLA -3.91%↓) first-quarter deliveries fell 8.5% y/y to just 386,910, the lowest since Q3 2022. This trailed frantically falling market consensus which landed at 457,000 (up 8% y/y) versus the previously reduced estimate of 478,000 (up 13% y/y) at the end of February. Even my lowest estimate of 411,000 (down 3% y/y) looks rich by comparison (see Tesla Q1 Trends: Rockslide, 3/25/24).
Results were down 20% versus disappointing Q4 results and worse than the 4.7% y/y decline Tesla reported during the Covid pandemic in Q2 2020—the only other year/year decline in quarterly deliveries Tesla has ever reported.
It won’t be the last. I long have detailed Tesla’s fading momentum in same-store sales which it covered via market expansions into Europe and China and then with global
penetration of Model Y—its “newest” model which it launched in 2019. With easy quarterly comps exhausted as of last year and no credible additions to its paltry, aging fleet in time to save it, I projected Tesla would run out of runway this year (see Tesla: Moving The Goalposts Works Until It Doesn't, 1/26/24).
Sure enough, results in the first quarter suffered primarily, as I expected, on high double-digit y/y declines in sales of Model Y in every major market, which added to continuing weak Model 3 sales. Together they comprised 96% of total deliveries, obscuring the modest contribution of perhaps 3,000-4,000 Cybertrucks which likely will outsell foundering Models S and X in Q2.
I long have attributed Tesla’s weak product line-up of notoriously poorly made cars and atrocious customer service for its failure to hold the foundational market share it carved out against the now rapidly escalating line-up of newer, better-made, and well-supported competitors in every market. Here’s what I wrote about this time last year:
Tesla has stubbornly compounded its problems for several years now by starving investment into new models that could take up the baton. Instead, it continues to produce the same paltry and increasingly aging fleet of just four models still largely based on its vintage 2012 Model S. Even worse, Teslas still persistently rank near the bottom every year in quality and reliability—plus terrible customer service.
No wonder recalls and government investigations and lawsuits against Tesla have been piling up.
Tesla's Still Bloated Inventory Signals June Sales May Disappoint, Along With Q2 Market Estimates, 5/30/23
The same problems have worsened over the past year, with increasingly odious behavior by CEO Elon Musk adding to years of his incompetent management to accelerate Tesla’s decline (see Elon Musk Can't Be Trusted. He Also Can't Be Stopped, Apparently, 2/28/24).
The tragedy is Tesla likely would still be a national treasure if Musk wasn’t destroying it every day.
Reuters reported today on the results of several studies confirming similar reports over the past year that Musk has damaged Tesla’s brand and sales prospects among potential EV buyers.
Tesla, however, again blamed production issues for weak sales in the first quarter:
Decline in volumes was partially due to the early phase of the production ramp of the updated Model 3 at our Fremont factory and factory shutdowns resulting from shipping diversions caused by the Red Sea conflict and an arson attack at Gigafactory Berlin.
Perhaps. Tesla’s Q1 production did decline slightly to 433,371 (down 1.7% y/y) but this still created a net excess of 46,561 (up 160%) cars it had available but was unable to sell despite waves of drastic price cuts plus expensive incentives.
Indeed, excess inventory has been growing every quarter for two years to now a record 161,005—up 67% versus last year. I calculated more than 66,000 excess finished cars sitting in inventory have accumulated over just the past four quarters. That number jumps to 144,366 accumulated as of the trailing eight quarters—enough to cover the “miss” in sales more than 2x versus market estimates.
Sound familiar? Tesla also blamed production disruptions in Q3 2023 when deliveries were a disappointing 435,059 versus market consensus at 455,000. At that time I noted that excess inventory had climbed to 103,692:
This still left long-term cumulative excess inventory at 103,962 cars—more than 5x the 20,000 shortfall versus market estimates. The LTM excess was 61,345 cars, which is more than 3x the miss.
Either way, Tesla clearly had more than enough cars gathering dust ready to sell.
Tesla's Problem is Fading Demand, Not Disruptive Factory "Updates," 10/5/23
This time deliveries were much lower, the miss versus market expectations much worse, and the deep well of unsold inventories even more formidable. The toll on revenue and profits for the quarter, and likely the full year, will be severe.
My last Q1 estimate was based on deliveries flat to down 3% to 411,000-424,000. That indicated Q1 revenue at $21.6-22.2 billion (down 5-8% y/y), with EBITDA at $3.1-3.2 billion (14.5% margin; down 380 bps) and net income at $1.7-1.8 billion (down 29-31% y/y).
With Q1 deliveries as reported, I estimate revenue at $20.3 billion (down 13% y/y), with EBITDA down 31% at $2.94 billion (14.5% margin; down 380 bps) and net income at $1.62 billion (down 35% y/y).
I expect second-quarter deliveries to rebound a bit versus the dismal first quarter with production issues eased and more Cybertrucks rolling out, but likely still lower versus last year. My revised estimate for Q2 deliveries is 416,412 (down 10.7%). That puts Q2 revenue at $21.7 billion (down 13.1% y/y), with EBITDA down 33% at $3.14 billion (14.5% margin; down 380 bps) and net income at $1.73 billion (down 36% y/y).
I assume Q1 and Q2 account for 46-48% of 2024 deliveries as still modest sales from faster-growing Cybertrucks offset falling nominal sales of Models S & X and complement likely flat sales of Models 3 & Y in the second half versus slowing sales last year.
This pegs 2024 deliveries lower y/y for the first time at 1.74-1.77 million (down 2-4%)—with my previous low estimate now the high mark of my projected range. This indicates 2024 revenue at $90-91.3 billion (down 6-7% y/y), with EBITDA at $13.5-13.7 billion (down 18-19%) and net income at $9-9.1 billion (down 39-40% y/y)—see attached model.
Stay tuned.
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At what price for TEZLA does the margin desk give Mr. Musk a call?