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Tesla Deliveries Risk A Knock From China's Recession And Lacklustre Demand

Tesla Deliveries Risk A Knock From China's Recession And Lacklustre Demand
Tesla is anticipated to report poor first-quarter deliveries next week as the boost from price reduction fades and the US manufacturer faces stiff competition for buyers in a declining electric-vehicle industry.
After years of strong sales growth that propelled it to the world's most valuable manufacturer, Tesla is expecting a dip in 2024.
The corporation has been hesitant to refresh its ageing models at a time when high interest rates have reduced consumer desire for large-ticket items and competitors in China, the world's largest auto market, are introducing low-cost models.
"Tesla may be witnessing price-cut fatigue with consumers and may be testing profitability levels that the company may not find acceptable," Morgan Stanley analyst Adam Jonas said in a report to clients earlier this month.
"Such conditions may not significantly improve near-term given the age of Tesla's product line-up."
Tesla shares have fallen roughly 28% this year, making them the poorest performer in the S&P 500 index.
Tesla is predicted to deliver 458,500 units in the fiscal quarter ending March 31, according to Visible Alpha's survey of 17 analysts.
That is greater than the 422,875 units it delivered in the same quarter last year, but represents a more than 5% decrease from the preceding three months.
Since late 2022, Musk has aggressively reduced Tesla pricing at the expense of profitability, boosting sales but infuriating many of its customers who have seen the value of their vehicles decline.
The New York Auto Show opens to the public Friday, and it comes at a rough time for the industry.
Musk said price cuts are required to keep manufacturing running, citing winter and high financing costs for reducing demand.
Tesla proceeded to decrease prices early this year in the United States, China, and Germany, while increasing discounts and incentives to encourage demand. For example, Tesla is presently offering $7,680 discounts on some new Model Ys in the United States.
"Teslas have the dubious honour of being the fastest-depreciating vehicles in the US," HSBC said in a report this week.
"We can see how cheaper works for consumables, but we are less convinced it works for consumer durables for which residuals are part of the cost equation."
Tesla warned in January that sales growth would be "notably lower" this year as it focused on producing its next-generation electric vehicle.
A protracted pricing war has made China a difficult market for automakers, and Tesla lost its position as the world's top-selling EV maker in the fourth quarter to BYD, which has been driving major price cuts in the country.
In the first two months of the year, Tesla shipped 131,812 vehicles produced in China, a 6.2% decrease from the previous year.
Due to restrictions on battery material procurement from China, its Model 3 compact sedans will not be eligible for a $7,500 federal tax credit in the United States this year.
Buyers in the United States have also opted for less expensive hybrid vehicles, which are more fuel efficient than gas-powered automobiles and have a longer driving range than battery-powered EVs.
Tesla also faced manufacturing shutdowns in Germany this quarter, but experts expect the hiccups to have little impact on deliveries.
Most production at Tesla's factory in Berlin was halted from Jan. 29 to Feb. 11 due to the Red Sea shipping crisis, which impacted the supply of components needed for its vehicles.
In March, it experienced a power outage for almost a week when far-left demonstrators claimed responsibility for setting fire to an energy pylon near the factory.

Christopher J. Mitchell

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