Tesla reported on Thursday its first year-over-year decline in annual sales since at least 2015, as the automaker handed over fewer-than-expected electric vehicles in the fourth quarter and incentives failed to boost demand for its aging lineup of models.
The annual decline for the Austin, Texas, company came despite offers such as 0% financing, free charging and low-priced leases.
Tesla delivered 495,570 vehicles from October through December, a 2.3% year-over-year increase, boosting deliveries to 1.79 million for the full year. But that was 1.1% below 2023 sales of 1.81 million as overall demand for electric vehicles in the U.S. and elsewhere slowed.
The fourth-quarter boost came with a cost. Analysts polled by FactSet expected Tesla's average sales price to fall to just over $41,000 in the quarter, the lowest in at least four years.
That doesn't bode well for Tesla's fourth-quarter earnings, which the company said it would announce on Jan. 29.
In 2022, Tesla predicted that its sales would grow 50% most years, but the prediction ran into an aging model lineup and increased competition in China, Europe and the U.S.
In the U.S., analysts say most early adopters of technology already have electric vehicles, and more mainstream buyers have concerns about range, price and the ability to find charging stations on longer trips.
The fourth-quarter deliveries fell short of Wall Street estimates. Analysts polled by data provider FactSet expected sales of 498,000 vehicles.
Tesla shares fell 5.2% in trading early Thursday, but shares are up more than 50% over the last 12 months, surging with the election victory by Donald Trump.
The fall indicates investor worries over the challenges facing CEO Elon Musk, who expected promotions including zero-interest financing to power a "slight growth" in deliveries in 2024.
Musk has pivoted Tesla to self-driving taxis and backed Trump with millions of dollars in campaign donations in hopes that it could bring regulatory relief for the company.
Falling sales early in the year led to once-unheard of discounts for the automaker, cutting into its industry leading profit margins.
Competition from legacy and startup automakers is also growing as they try to nibble away at the company’s market share.
The sales drop is a test to investors who have been pushing up Tesla stock since the election on a bet that the incoming Trump administration will ease EV regulations and help Tesla's move to making completely self-driving vehicles using AI.
Daniel Ives, a financial analyst at Wedbush, said he thinks the stock is still worth buying despite the sales drop.
"We have never viewed Tesla simply as a car company...instead we have always viewed Musk and Tesla as a leading disruptive technology global player," said Ives in a report. "And the first part of this grand strategic vision has taken shape."
William Stein, an analyst at Truist Securities, thinks Tesla will struggle to sell vehicles in the future months and is expecting further discounting to boost deliveries will weigh on it financial results.
Nearly all of Tesla’s sales came from the smaller and less-expensive Models 3 and Y, with the company selling only 23,640 of its more expensive models including X and S, as well as the new Cybertruck.
With self-driving technology still years away, analysts have said Tesla would have to rely on cheaper versions of 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 been showing signs of demand weakness, analysts have said.
Tesla has yet to break out deliveries for the Cybertruck. The company said on Thursday it handed over 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 lean on the planned launch of a new low cost model in 1H25 to stoke confidence on the opportunity for 2025 deliveries to grow year-over-year," said David Wagner, portfolio manager at Tesla shareholder Aptus Capital Advisors.
Tesla's global electric vehicle sales edged out Chinese rival BYD, which announced Thursday that the total soared 41% last year, including 1.77 million EVs. The company is vying with Tesla for the world's top selling EV maker.
Fourth quarter production of 459,445 vehicles was below total deliveries for the quarter, and full year production of 1.77 million was less than the year's sales.
