Tesla (TSLA, Financial) has sparked concerns over its growth trajectory following a disappointing report on Q1 deliveries, which fell short of expectations. This has led to a significant 33% drop in TSLA shares for the year, as market participants adjust their forecasts for the company’s earnings and revenue growth in FY24.
Key points from the Q1 report include:
- A year-over-year decline of 8.5% in Q1 deliveries, totaling 433,000 vehicles, marks TSLA's first such decline since 2020, attributed to challenges beyond the company's control.
- External factors such as a forced shutdown of TSLA's Berlin factory due to a nearby fire and production halts from parts shortages caused by the Red Sea conflict significantly impacted operations.
- Even before these incidents, TSLA faced sluggish sales, particularly in China, where competition is fierce. Reports indicated a significant drop in shipments from the Shanghai factory, despite aggressive price cuts and incentives.
- Chinese EV makers like NIO (NIO, Financial), Li Auto (LI, Financial), and XPeng (XPEV, Financial) reported better-than-expected delivery figures for March, signaling a competitive shift as they gain market share against TSLA.
- In response to lower-than-expected Q4 results and the anticipation of reduced vehicle volume growth in 2024, TSLA is focusing on its Full Self-Driving (FSD) platform to stimulate demand, including offering a 1-month free trial.
- Long-term growth for TSLA hinges on the success of its FSD technology and a transition towards a software/AI-centric business model, despite the current financial strain from heavy investments in this area.
The overarching message is that TSLA's struggle with Q1 deliveries underscores the challenges the company faces in FY24, with major growth drivers like the Model 2 vehicle and FSD software revenue still on the horizon.
