Tesla shares fall 29% in the first quarter as global dominance declines

It was a brutal first quarter for investors.

Shares of the electric vehicle maker fell 29% in the first three months of the 12 months, the worst quarter for the company’s stock since late 2022 and the third-worst since Tesla went public in 2010. It was also the biggest loser on the S&P 500 index.

The biggest problem on Wall Street is Tesla’s core business. The company is ready to announce first-quarter vehicle production and deliveries in the coming days, and even bulls expect weak results despite price cuts and buyer incentives that were in place throughout the quarter.

On Thursday, the last trading day of the quarter, analysts expected about 457,000 deliveries during the period, in line with a median of 11 analyst estimates compiled by FactSet. This would represent a rise of 8% from 422,875 a 12 months earlier. Estimates for the quarter ranged from 414,000 to 511,000 deliveries.

Analysts who updated their data in March were the most bearish, with estimates starting from 414,000 to 469,000. Independent auto industry researcher Troy Teslike expects the company’s deliveries to be lower than even the lowest estimate obtained by FactSet.

The deliveries are the closest approximation to sales reported by Tesla, but aren’t precisely specified in the company’s announcements to shareholders.

Here are the 4 major the reason why Tesla slipped in the first quarter.

In China, competition from fully electric vehicles, including recent models that cost lower than Tesla’s popular Model 3 SUV and sedan.

By the end of 2023, China’s BYD will dethrone Tesla as the world’s largest electric vehicle manufacturer. In the first quarter of this 12 months, BYD kept up the pressure by launching the Qin Plus EV with a starting price of around $15,200, followed by the BYD Seagull, a small all-electric hatchback with a starting price of under $10,000.

Chinese smartphone company Xiaomi is stepping into the game with its first vehicle, an all-electric SUV that costs significantly lower than Tesla’s entry-level Model 3 sedan. Xiaomi CEO Lei Jun said the standard version of the SU7 will sell in China for the equivalent of $30,408, a price he admitted would mean the company loses money on each sale. It’s about Tesla’s Model 3 $4,000 more than this.

In response, Tesla lowered prices, but sales remained low.

According to data from the China Passenger Car Association, Tesla sold 71,447 cars made in China in January, including 39,881 domestically, down from December. In February, that number dropped again to 60,365 Teslas made in China, including exports.

As sales plummeted, Tesla cut production at its Shanghai factory, moving employees from working six and a half days per week to 5 days, Bloomberg first reported.

Tesla didn’t provide guidance for 2024 in its January earnings call, but analysts consider Tesla’s difficulties in China are a harbinger of a difficult quarter, if not the entire 12 months.

Deutsche Bank analyst Emmanuel Rosner lowered Tesla’s price goal this week, citing weaker-than-expected sales in China and the company’s recent plan to chop production in the region. Rosner currently expects Tesla to report deliveries of 414,000 units in the first three months of 2024 and anticipates only mid-single-digit growth from Tesla this 12 months.

Attacks in the Red Sea, activist clashes in Europe

There was also drama in Europe.

Tesla and other manufacturers such as Volvo suspended some production on the continent in January attributable to component shortages following attacks on shippers in the Red Sea. Attacks by the Iran-backed Houthi militia proceed to disrupt one in all the world’s busiest routes.

Then, in March, there was a dramatic protest by environmentalists in Germany. Opposing Tesla’s plans to expand the footprint of its automobile and battery plant in Brandenburg near Berlin, protesters set fire to electrical infrastructure near the Tesla factory. Although the fire didn’t spread to the factory, it left the plant without sufficient power to operate, forcing a brief suspension of production.

CEO Elon Musk visited the German factory after the attack to reassure staff. He also called the protest “extremely stupid.” Tesla’s chief policy officer, Rohan Patel, wrote in

Meanwhile, in the Nordic countries, Tesla service technicians and other staff went on strike in defense Swedish trade union IF Metall. The union group has been putting pressure on Tesla since October 2023 to barter and sign a collective agreement with its employees.

IF Metall’s website states that nine out of ten staff are unionized in Sweden, yet Tesla resisted unions, as it has consistently done in the U.S., and rejected IF Metall’s negotiating efforts.

An aging lineup, the beginnings of the Cybertruck

While sales of electrical vehicles proceed to achieve popularity around the world, the rate of growth has slowed. And since Tesla is not any longer the dominant player, each recent product becomes more necessary. There’s not much in the tank.

Cybertruck remains to be in its early stages of development and has a distinct segment audience. The company began shipping the angular, unpainted steel truck model in December during a promotional event in Austin, Texas.

Musk previously stated on an earnings call that Tesla was “digging its own grave” with the sci-fi-inspired Cybertruck. In an interview with Tesla fan and auto critic Sandy Munro in late 2023, Musk cautioned that “Cybertruck is not something that will be material to Tesla’s finances” in 2024 and “will probably be material in 2025.”

Tesla is preparing to supply the refreshed Model 3, known as the Highland, in Fremont, California. Larry Magid of Forbes wrote, “Visually, the changes to the exterior are subtle.” He also didn’t like Tesla’s controversial design decision to omit the “stems” on the sides of the steering wheel. Highland drivers use on-screen buttons and controls to change between driving, reversing and parking, or to signal a turn or lane change.

Tesla is working on a wholly recent platform, a less expensive electric vehicle that fans call “Model 2.” But it won’t be delivered to customers for years.

Musk continued to bet that Tesla’s customers and shareholders would follow the company no matter his increasingly provocative rhetoric about X and beyond.

Earlier this month, Musk met with former President Donald Trump in Florida. He was called to “red wave” in the upcoming U.S. elections and has shared, liked, or otherwise promoted far-right accounts and content on X, where he currently has 178.8 million followers. He has repeatedly disparaged undocumented immigrants, criticized corporate diversity initiatives, and made absurd claims that Haitian migrants are cannibals.

Musk’s political ideology is at odds with the groups of people most likely to buy his products. Research by: Studies have shown that supporters of electric vehicles tend to lean towards left-wing ideology Pew research AND Gallup last year.

Musk also bet that Tesla shareholders and its board would follow his lead. In February, Musk said he would request a shareholder vote to move Tesla’s headquarters from Delaware to Texas after a judge in Delaware invalidated a $56 billion compensation package awarded to him in 2019 on the grounds that the board had failed to prove “the compensation plan was fair.”

Before the ruling, Musk began pressuring Tesla shareholders and management to give him more control over the electric vehicle maker.

“I feel uncomfortable raising Tesla to be a leader in AI and robotics without ~25% voting control,” Musk wrote in a January post.

Investor Ross Gerber, a longtime Tesla bull, called the demand tantamount to “blackmail.” interview for CNBC.

This all adds up to over $230 billion in lost market capitalization for Tesla and its shareholders since the calendar turned to 2024. This was a very lucrative quarter for short sellers who expected this downturn.

According to data from S3 Partners, the value of Tesla Short increased by over $5.77 billion in 2024, making it the most profitable brand in the US. Short interest at the end of Thursday’s session was about 3.76% of market value, representing $18.71 billion in notional value.

Brad Gerstner of Altimeter Capital is buying the dip. Gerstner told CNBC this week that the company is currently making “enormous progress at an increasingly rapid pace” on its autonomous vehicle technology efforts.

Musk has been speaking on this topic for years. In 2015, he told shareholders that Tesla cars would be “fully autonomous” and able to drive themselves by 2018. In 2016, he said Tesla would be able to send one of its cars on an off-road test without requiring human intervention by the end of the following year.

Tesla still hasn’t developed a robotaxi, an autonomous vehicle, or the technology that would transform its cars into “Level 3” automated vehicles. Tesla does, however, offer advanced driver assistance systems (ADAS), including a standard Autopilot option or a premium fully autonomous driving “FSD” option, the latter of which costs $199 per month for U.S. subscribers or $12,000 upfront.

Aiming for quarter-end sales, Musk recently ordered all sales and service staff to install and demonstrate the FSD for customers before handing over the cars. In an email to employees, he wrote: “Almost no one really realizes how well (supervised) FSD actually works. I know this will slow down the delivery process, but it’s still a difficult requirement.”

Despite its name, Tesla’s premium option requires a human driver to be behind the wheel, ready to steer or brake at a moment’s notice.

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