Tesla deliveries to hit record, but fall short of Musk's aspirations
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[December 27, 2023] By
Akash Sriram and Hyunjoo Jin
SAN FRANCISCO (Reuters) - Tesla is expected to post another record
quarter for electric vehicle (EV) deliveries, likely shy of an ambitious
2 million annual internal target that CEO Elon Musk touted at the
beginning of the year.
Faced with slowing sales, Tesla leveraged its industry-leading margins
and slashed prices of its four car models globally in 2023, with a focus
on China, where the company has lost market share to locals including
BYD.
The price war and slowing EV demand, however, have prompted automakers
including Ford Motor to pull back on their electrification plans,
leaving Tesla as the undisputed leader in the United States and helping
its stock more than double this year.
"The fourth quarter is typically the strongest of the year in terms of
deliveries for Tesla, we're expecting that to be the case again this
year," said Garrett Nelson, senior analyst at CFRA Research.
Tesla likely delivered 1.82 million vehicles globally in 2023, up 37%
from 2022, with about 473,000 units in the fourth quarter, according to
14 analysts polled by LSEG.
In January, Musk said that Tesla has the potential to achieve 2 million
deliveries this year, if there was no "freaking force majeure". But as
recently as October, he warned that higher borrowing costs were
pressuring demand.
The company, which made a year-end sales push by increasing discounts on
its key models, has said it aims to achieve a 50% average annual growth
rate over multiple years.
Going into 2024, the EV market leader will have to contend with the loss
of federal tax credits for some of its cars in the United States as well
as in Germany, where the government is prematurely ending its EV subsidy
program.
This may force more price cuts next year even though interest rates and
battery ingredient costs are expected to ease.
Jairam Nathan, an analyst at Daiwa Capital Markets, trimmed his estimate
for Tesla's deliveries next year to 2.04 million from 2.14 million and
said he was modeling for a 4% decline in average revenue per car from
2023.
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A man wearing a face mask following the coronavirus disease
(COVID-19) outbreak walks by Tesla Model 3 sedans and Tesla Model X
sport utility vehicle at a new Tesla showroom in Shanghai, China May
8, 2020. Picture taken May 8, 2020. REUTERS/Yilei Sun
2024 CHALLENGES
The company is also dealing with a rise in regulatory scrutiny of
its self-driving systems and other parts in the United States and in
some European countries. Earlier this month, Tesla recalled nearly
all of its 2 million vehicles on U.S. roads to install new
safeguards.
Musk has previously said he believes full self-driving (FSD) could
one day account for most of Tesla's value.
Analysts polled by Visible Alpha expect 2.2 million deliveries by
Tesla next year. Most believe that the newly released Cybertruck and
a refreshed Model 3 are not enough to boost demand.
"Tesla candidly admitted the company is now in an intermediate
low-growth period," Deutsche Bank analyst Emmanuel Rosner wrote in a
note, citing a meeting with Investor Relations Chief Martin Viecha.
Investors expect Tesla's margins to remain pressured as the company
ramps Cybertruck production and prepares to launch a cheaper car
platform.
Musk has said Cybertrucks will be a small percentage of the vehicles
Tesla makes next year and that there are "enormous challenges" in
reaching volume production for the pickup, whose controversial
design has divided fans.
Tom Narayan, an analyst at RBC Capital Markets, said in a report
that Cybertruck would represent 3% of Tesla's volumes in 2024,
calling it more of a "halo" product that could attract consumers to
the brand.
(Reporting by Akash Sriram in Bengaluru and Hyunjoo Jin in San
Francisco; Editing by Sayantani Ghosh)
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