Tesla shares sink as car shipments drop unexpectedly for first year

Tesla reported its first drop in annual shipments on Thursday, as the automaker delivered fewer-than-expected electric vehicles in the fourth quarter and incentives failed to boost demand for its aging model line.

The company’s shares fell more than 5%, showing investor concerns about the challenges facing CEO Elon Musk, who expected promotions including zero-interest financing to power a “slight increase” in shipments in 2024.

Cutting European subsidies, a shift in the U.S. to lower-priced hybrid vehicles and tougher competition, especially from China’s BYD, have pressured Tesla.

In response, Musk pivoted Tesla toward self-driving taxis and backed President-elect Donald Trump with millions of dollars in campaign donations in hopes that he could bring regulatory relief to the company.

Tesla delivered 495,570 vehicles in the three months to December. 31, missing estimates for 503,269 units, according to 15 analysts polled by LSEG. It produced 459,445 vehicles in the period, about 7% less than a year ago.

Shipments for 2024 came in at 1.79 million, down 1.1% from a year ago and below estimates of 1.806 million units, according to 19 analysts polled by LSEG.

That was ahead of rival BYD, which reported a 12.1% rise in battery electric vehicle sales to 1.76 million in 2023 thanks to competitive pricing and a stronger push into Asian and European markets.

With self-driving technology still years away, analysts have said Tesla will have to rely on cheaper versions of the current cars and the Cybertruck to achieve Musk’s target of 20% to 30% sales growth in 2025.

The truck, known for its futuristic design, has shown signs of weak demand, analysts say.

Tesla has yet to make deliveries for the Cybertruck. The company said Thursday it delivered 471,930 Model 3 and Model Y vehicles and 23,640 units of other models, including the Model S sedan, Cybertruck and Model X premium SUV.

“Tesla will continue to rely on the planned launch of a new low-cost model in 1H25 to instill confidence in the possibility that 2025 deliveries will grow year over year,” said David Wagner, portfolio manager at Tesla shareholder Aptus Capital Advisors.

Trump bet

Tesla shares are coming off a strong 2024, in which they rose more than 60% thanks to Trump’s election victory.

Musk has said he plans to use his promised role as government efficiency czar under the Trump administration to advocate for a federal approval process for autonomous vehicles to replace current state-specific laws, which he described as “too much painful” to navigate.

Tesla’s Autopilot and Full Self-Driving technologies, which are not yet fully autonomous, have come under scrutiny due to lawsuits, investigations by the U.S. traffic safety regulator and a Justice Department criminal investigation. .

The main concern is whether Tesla may have overestimated the self-driving capabilities of its vehicles.

Tesla is also under pressure from older automakers. Its October registrations in Europe fell 24%, due to close competition from Volkswagen Group, whose Skoda Enyaq SUV dethroned the Model Y as the region’s best-selling EV, according to data research firm JATO Dynamics .

Lower prices and incentives cut into Tesla’s profit margin on vehicle sales last year. Wall Street, however, expects demand to pick up in 2025 as the Federal Reserve cuts interest rates.