Tesla has Wall Street worried

Financial analysts are expecting automaker to report little-to-no sales growth in latest quarter

Tesla Inc. may be headed for a gloomy milestone as waning demand for electric vehicles and elevated interest rates take a toll on sales.

Analysts rapidly lowered their projections for this week’s deliveries report as the quarter came to a close. Some on Wall Street are even braced for Tesla’s first sales decline since the early days of the pandemic.

On average, analysts surveyed by Bloomberg estimate that Tesla delivered 453,964 vehicles in the quarter. That would be down more than six per cent from the company’s record showing in the fourth quarter, which tends to be the best time of year for sales. The key will be delivering more cars than the 422,875 managed in the first three months of 2023 and avoiding a first year-over-year drop since the second quarter of 2020.

Elon Musk may not have helped matters in the final week of March. The CEO imposed a new directive that he acknowledged would slow the sales process, requiring every customer in North America be taken for short drives to test out the driver-assistance feature Tesla misleadingly markets as Full Self-Driving.

Tesla started offering a free onemonth trial of the feature, which otherwise costs $199 (U.S.) a month as a subscription or $12,000 to purchase. This was one of several perks the company dangled to entice consumers, along with temporary $1,000 discounts and free supercharging. Tesla also stepped up advertising on Google and X, the social media service Musk owns.

Musk warned investors in January the company is “between two major growth waves.” The first was fuelled by the Model 3 sedan and Model Y sport utility vehicle, and the next is expected from the launch of a cheaper next-generation vehicle slated to start production late next year.

With that next-gen car a ways off, some analysts fear Tesla’s outlook for a “notably lower” growth rate this year may actually manifest in no growth at all in the first quarter.

Emmanuel Rosner of Deutsche Bank cut his deliveries estimate twice in the matter of just over two weeks last month. He now expects the company sold around 414,000 cars in the quarter, down about two per cent from a year ago.

In China, Tesla is struggling to keep pace with BYD Co., which became the world’s top-selling EV maker at the end of last year. The U.S. carmaker instructed employees at its Shanghai facility last month to lower production by working five days a week instead of the usual 61⁄2 days, people familiar with the matter told Bloomberg.

The Model 3 and Model Y accounted for 96 per cent of Tesla’s global deliveries last year.