Tesla posted its sales numbers for the first three months of 2023 and the numbers are great. The company delivered 422,875 electric cars, which put it on course to deliver close to 2 million vehicles this year. And yet, the market response is subdued and the analysts sound disappointed.
Let’s put things in perspective - Tesla grew its sales by 4% over the previous quarter and this is the number everyone is focusing on. Tesla cut the prices of its vehicles at the beginning of this year and the expectation was for the sales to sky-rocket. It’s hard to call a 4% increase a sky-rocketing result.
Looking at Tesla’s performance in the same period 12 months ago, we realize the production and deliveries increased by a whopping 36%, but that was expected - the production ramp-up across its Gigafactories is progressing, and Giga Berlin is posting new records every month.
It seems the cuts were driven by the company expecting the market slowdown and trying to counteract it the best way it could. Thankfully Tesla has room to adjust its prices and still remain profitable.
Last year Tesla delivered 1.3 million vehicles and with the 1st quarter results like these, it may well approach the 2 million mark. Tesla would have to increase its production and delivery rate by 12% every quarter to be in a chance to reach its promised 2 million vehicles target. While the company did manage to get a 36% increase in year-on-year performance, it would essentially have to repeat it in the next 9 months.
This explains why many analysts are not impressed and many are sounding warning bells. Tesla’s performance is stellar in comparison to its many competitors, while some Chinese manufacturers make more electric cars, Tesla has no benefit from government support. But the current uncertain market situation and possible financial crisis on the horizon will mean that even the deepest price cuts may still prevent the company from reaching its sales goals.
That’s one metric that institutional investors care the most about. Taking a slightly wider point of view though, we can clearly see that Tesla remains the most profitable automaker at the moment and it will continue to do so for many years to come. Eventually, some legacy automakers will catch up to Tesla with sales volumes, and some maybe even will overtake it. But it will be a while before anybody catches up to Tesla’s profit margins.