Jul 23 min read

Tesla Faces Challenges Amid Prolonged Sales Slump

Infotrading.io - Tesla Inc. (TSLA) is bracing for another quarter of weaker sales, with analysts projecting the company to report the delivery of 441,019 electric vehicles for the second quarter. This figure represents a 5.4% decline from the same period last year, marking the second consecutive quarterly drop in sales, a situation Tesla hasn't faced since 2012 when it was phasing out its Roadster model.

Factors Contributing to the Sales Slump

Several issues that plagued Tesla earlier this year, such as a suspected arson attack at its Berlin factory and shipping diversions due to conflicts in the Red Sea, have now been resolved. This leaves the company with fewer excuses for its sales slowdown, aside from the increasing competition and an aging lineup of vehicles.

Tom Narayan, a global autos analyst at RBC Capital Markets, highlighted the challenges Tesla faces with its older vehicle models struggling to compete with newer offerings from rival electric vehicle (EV) manufacturers. "It’s tougher to grow when you have increased competition and the current model lineup is a little stale," Narayan said.

Elon Musk's Strategies to Boost Sales

Tesla's CEO, Elon Musk, has implemented several strategies to stimulate demand, including price cuts and attractive leasing deals. However, these measures have not been sufficient to reverse the sales decline, which began in the second half of last year. Additionally, Musk announced significant staffing cuts in April, affecting more than 10% of Tesla's workforce, including sales staff. While these cuts may have helped conserve cash, they could have negatively impacted sales numbers as well.

The Challenges of Online Sales

Musk's push towards a predominantly online sales model, encouraging consumers to order Teslas without visiting showrooms, poses additional challenges. New EV customers often have numerous questions regarding battery range, charging stations, and software features, which are typically addressed in person by sales staff.

Model Y and Cybertruck Performance

Tesla has struggled to build on the success of its Model Y, which was the best-selling vehicle globally last year. The Model Y has been on the market since 2020, while the Model 3 sedan was introduced three years earlier. Tesla's first pickup, the Cybertruck, inspired by Blade Runner, has also experienced a slow start since production began late last year, with multiple recalls due to issues with the accelerator pedal and windshield wiper.

Investor Sentiment and Future Prospects

Despite the lowered delivery estimates from several analysts, Tesla's stock has shown resilience. While the stock is down 20% for the year, Musk has managed to buoy investor confidence by promising new models and discussing prospects for Tesla’s humanoid robots and a dedicated robotaxi, expected to be unveiled in August.

Last month, Musk received a significant vote of confidence when shareholders re-approved his $56 billion compensation package. Ben Kallo, an analyst at Robert W. Baird, emphasized the importance of Q2 deliveries for Tesla's full-year numbers, noting that investors are increasingly looking forward to the Robotaxi event on August 8.

Kallo projects Tesla will deliver 435,200 units this quarter and approximately 1.83 million for the year, a modest increase from its 2023 total. Despite Tesla's commitment to introducing new models by early next year, details remain sparse, and the company has reiterated that growth in 2024 will be "notably lower."

Tesla's prolonged sales slump highlights the challenges the company faces in a competitive EV market. While Musk's strategies and promises of future innovations have maintained some investor confidence, the company's ability to overcome its current hurdles and achieve sustained growth remains uncertain. As Tesla prepares to report its Q2 results, all eyes will be on its delivery numbers and any new announcements that could impact its trajectory in the months ahead.