Tesla delivers a "Waterloo", besides sluggish demand, does Musk have to bear the biggest blame?

As the absolute leader in the global electric vehicle industry, Tesla's first-quarter deliveries encountered a "Waterloo", enough to make all other electric car manufacturers uneasy.

On April 2nd, Tesla announced its first-quarter car production and delivery report, showing that Tesla's deliveries fell by 8.5% year-on-year to about 386,800 vehicles, a decrease of over 20% from the previous quarter, far below analysts' previous expectations of 449,000 vehicles, marking the largest deviation from expectations on record.

Wedbush analyst Dan Ives called it "an inexplicable disaster", despite previous poor expectations. This disappointing performance also suggests that Tesla may struggle to meet the first-quarter profit expectations that have already been lowered by Wall Street.

After the data was released, Tesla's stock price plummeted by 4.9% on the same day.

The reasons for Tesla's delivery decline are not only the mentioned disruptions in ocean shipping and the arson case at the German factory. Analysts generally believe that the fundamental problem lies in weak global market demand, especially in the United States. Some analysts also believe that Elon Musk, who wears many hats and speaks bluntly, is also to blame.

Weak Market Demand, Car Manufacturers Lower Prices to Save Themselves

Tom Narayan, an automotive analyst at RBC Capital Markets, pointed out that Tesla's growth in the United States has significantly slowed down, with its main models, the Model Y and 3, nearing market saturation.

Due to the lack of affordable models in the U.S. electric vehicle market, increased uncertainty in government subsidy policies, and high interest rates dampening consumer enthusiasm for car purchases, the growth rate of the U.S. electric vehicle market is not outstanding compared to other global markets.

Amid weak demand, the once high-profile U.S. electric car newcomer Fisker declared bankruptcy, and up-and-coming Rivian lowered its 2024 production expectations, and resorted to layoffs to survive, indicating tough times for U.S. newcomers in the electric vehicle market.

In China, the world's largest electric vehicle market, "King of Electric Cars" BYD fell short of expectations in both production and sales in January and February, with February sales nearly halved compared to January.

Competition in the Chinese market is intensifying, with car manufacturers resorting to price cuts to stimulate market demand. BYD even declared "electricity is cheaper than gasoline", and has almost reduced prices for all its models since the beginning of the year However, the high prices of electric vehicles and the frequent need for charging still make mainstream consumers hesitant towards electric cars. Over the past year, as the growth of electric vehicle sales has slowed down, car manufacturers have been forced to attract more consumers by lowering prices.

Tesla's Delivery Decline, Can Musk Escape Blame?

Regarding the reasons behind Tesla's declining deliveries, it can be analyzed from two different perspectives.

Firstly, some believe that Musk has not devoted enough attention to Tesla. Especially in this unprecedentedly fierce competition in the electric vehicle market, Tesla needs more management and care.

Currently, Musk serves as the CEO of the social media platform X and the innovative AI company Grok, which is developing a competing product called ChatGPT. In addition, Musk is also the CEO of SpaceX and Boring Company. Musk's multiple roles have caused dissatisfaction among Tesla investors.

According to Wedbush Securities analyst Dan Ives, "Right now, (Tesla) needs Musk at the helm."

He emphasized that Musk needs to drive Tesla into a new growth stage, especially in the current "emergency."

Another issue related to Musk is whether his public statements and extreme remarks on X have harmed the Tesla brand.

This is the view of some Tesla investors. For example, Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management, stated on X that due to Musk's behavior, Tesla is unable to sell its cars.

It must be acknowledged that directly linking this view to the decline in Tesla's sales seems somewhat far-fetched, especially in the current intensified market competition.

However, it is worth mentioning that according to market intelligence company Caliber, based on its daily survey of consumer perceptions of major companies, Tesla's public rating has dropped to an all-time low.

Caliber's CEO Shahar Silbershatz stated, "Tesla's public rating in the US has been declining for years, dropping to a low of 31% in February 2024."

When Caliber first started tracking the company, Tesla's highest rating reached 70% (November 2021).

Silbershatz also revealed to the media that Musk himself is likely one of the factors contributing to the decline in brand reputation.

Tesla will announce its first-quarter performance on April 23, and all investors are concerned about one question: "Can 2024 be a new growth year?"

R.W. Baird & Co. analyst Ben Kallo lowered expectations for Tesla's first-quarter performance in a report to investors on Tuesday. Baird predicts that Tesla's revenue growth in 2024 will be 2%, while the market consensus expects a growth rate of 11%. **