Tesla sees sales of electric cars falling and brings forward the introduction of a cheaper model

American car manufacturer Tesla has reported lower sales for the first time in four years. Due to stagnation in the electric car market, turnover last quarter amounted to 21.3 billion dollars (20 billion euros). That was 9 percent less than the 23.3 billion of a year earlier.

The latest turnover figure for Elon Musk’s company was lower than analysts had expected – and they were already not optimistic. Nevertheless, Tesla shares rose sharply after hours on Tuesday, more than 10 percent. Investors were positive about the announcement that the company is bringing forward production of a cheaper model. Many analysts see its launch as crucial for Tesla to enter new markets.

“Global sales of electric cars are under pressure,” Tesla explained the lower turnover in its figures presentation. It also referred to the arson at his factory near Berlin and the unrest around the Red Sea.

The quarterly results of Tesla, which was known for strong growth for years, attracted above-average interest on Tuesday. The electric car market is stagnating worldwide; consumers are looking more at hybrids and find electric cars expensive and inconvenient. There is no breakthrough to the mass market.

This development has led to an aggressive price war among car makers, partly started by Tesla. This weekend, the Bloomberg news agency reported that the company had drastically reduced prices in China.

So far this has not led to additional sales. At the beginning of April, Tesla reported that it sold 386,810 cars in the first quarter, more than a fifth less than in the same period a year before. This month, the company announced that it would lay off more than 14,000 people, more than 10 percent of its workforce.

On Tuesday evening, the financial consequences of the decreased demand and the price war also became visible. For example, the profit margin per electric car has fallen considerably. Tesla now earns about $8,000 per car, the Reuters news agency calculates, compared to around $18,000 in 2022. Tesla’s profit halved to about 1 billion euros. It now has a stock of unsold cars that can last 28 days. A year ago that was 15 days.

Uncertainty

Yet investors also heard good news, after great uncertainty had recently arisen about Tesla’s share price. A month ago, Reuters reported that the company had put plans for a cheaper model on hold for the time being. Instead, CEO Musk would mainly like to focus on robot taxis. He denied this report, by the way.

Such a risky choice would not go down well with investors, as was evident from the price drop that followed. They have high expectations of a relatively low-priced mass market model, with which the brand can break through to the general public. This would be especially necessary now that Chinese competitors are entering the world market with relatively cheap electric cars.

Due to the wait-and-see market and the contradictory Reuters reporting, the share of the world’s most valuable car company has already fallen more than 40 percent this year. But on the announcement that the launch of cheaper models is being brought forward, shareholders responded euphorically on Tuesday – no matter how vague Musk remained about price, model and introduction date.

No car company

When presenting the figures, the CEO continued to insist to analysts that he does not see Tesla as a car company. He sketched a vision of a company that is major in artificial intelligence (AI) and robotics, based in part on years of own research into self-driving cars. The company also remains focused on creating its own network of robot taxis, Musk said.

An optimistic tone could also be heard about the electric car market on Tuesday. In a contradictory analysis, the International Energy Agency (IEA) concluded that the share of battery cars on the road will continue to grow significantly this year. Despite gloomy reports from several manufacturers, global sales will rise to 17 million units in 2024, compared to 14 million last year, according to the IEA.

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The different forecast may be due to the fact that the IEA is also explicitly looking at hybrid models, which have both a battery and a fuel engine. It seems that consumers are less enthusiastic about fully electric cars, but are purchasing hybrids.

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