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Final Up to date on: twenty fourth April 2025, 09:43 am
I began protecting a possible drop in Tesla’s gross sales a few yr and a half in the past. That’s when Tesla began actually pushing critical value cuts and offering vital further options on a complimentary foundation to new automotive consumers (together with repeat Tesla prospects). To me, this indicated Tesla could also be going through shopper demand headwinds, a departure from the corporate’s decade or so of purchaser demand outpacing Tesla’s manufacturing capability.
Such reductions and bonuses have solely elevated since then, and we did finally discover out that Tesla demand was not as excessive as wanted to maintain gross sales rising, and far beneath what was anticipated and forecasted by CEO Elon Musk.
Nonetheless, some folks nonetheless declare that Tesla has no demand downside in any way, and the rationale for Tesla’s gross sales drop is all right down to the Tesla Mannequin Y refresh — which presumably lowered demand in 2024 as folks waited for it after which hit particularly exhausting within the 1st quarter of this yr due to manufacturing facility retooling to vary over manufacturing from the previous Mannequin Y to the brand new one. As Tesla defined it within the 1st quarter report it simply revealed this week: “In Q1, we accomplished an industry first: simultaneously changing over production lines across all factories for the world’s best-selling vehicle4 – the Model Y. The Tesla team successfully ramped our production lines across four factories while managing supply chains across three continents without any major disruptions, demonstrating the advancement of our operational and supply chain management capabilities.”
There’s little question that was a giant change that concerned some critical manufacturing pause, but in addition congratulations to the great work of numerous individuals who made it occur as easily because it did. And … maybe Musk or another Tesla executives would have been a bit completely satisfied if it had concerned extra manufacturing pause, as a result of one thing else within the quarterly report nonetheless reveals indicators of shopper demand weak spot and doesn’t actually enable for the Mannequin Y manufacturing revamp to be an excuse for dropping gross sales.
On web page 6, Tesla has a line for “Global vehicle inventory (days of supply).” The determine within the first quarter of this yr was 22. That compares to 12 days within the 4th quarter of 2024, 19 days within the third quarter of 2024, 18 days within the 2nd quarter of 2024, and 28 days within the 1st quarter of 2024. In different phrases, it’s worse than the earlier three quarters, and a bit higher than the first quarter of final yr, which additionally was not a superb quarter.
Let’s tease this out a bit of bit for these not used to occupied with automobile stock. The purpose is that Tesla nonetheless has a variety of automobiles sitting and ready to get purchased, and it’s taking longer to promote them than in earlier quarters. You may argue that a variety of these automobiles have been in transit within the 1st quarter. Nonetheless, I don’t suppose that totally checks out, and Tesla doesn’t spend time on that argument.
Reportedly, the wait time for the brand new Tesla Mannequin Y is already fairly brief in China, and Tesla made imprecise references to weaker demand within the quarterly report. “Uncertainty in the automotive and energy markets continues to increase as rapidly evolving trade policy adversely impacts the global supply chain and cost structure of Tesla and our peers. This dynamic, along with changing political sentiment, could have a meaningful impact on demand for our products in the near-term,” Tesla wrote.
Notably, elsewhere, Tesla additionally referenced the rising incentives for consumers when explaining why income and profitability have been down. Right here’s what it wrote as negatives for income and profitability:
– lowered automobile common promoting value (ASP) (excl. FX impact1), resulting from combine and gross sales incentives
– lowered automobile ASP
We’ll see what is available in Q2, however, in the mean time, it’s wanting like Tesla does have a big shopper demand downside and the manufacturing line changeovers for the brand new Mannequin Y don’t adequately account for that.
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