Tesla Sales Fall 13%, Putting Carmaker On Course For Annual Drop

Tesla Inc.’s global sales tumbled for the second quarter in a row, leaving the carmaker in a deep hole to dig out from to avoid consecutive annual declines.

The company delivered 384,122 vehicles during the last three months, down 13% from a year earlier. Tesla now has an almost 110,000-car deficit to overcome in the second half in order to return to growth this year.

Sales did manage to exceed the most pessimistic analysts’ estimates, with the most bearish projecting a more than 20% decline. Tesla shares rallied on the report, rising as much as 4% at the open of regular trading Wednesday.

The figures run counter to Elon Musk’s claim in mid-May that Tesla’s car business had recovered from an early-year slump driven in part by blowback over his work in the Trump administration. Sales could be further challenged toward the end of this year if Congress passes the president’s multitrillion-dollar spending bill that would eliminate tax credits for EV purchases.

Tesla was counting on a boost in the quarter from the redesigned Model Y sport utility vehicle, by far its most important product. But the company’s otherwise-stale lineup is losing luster relative to BYD Co. and Xiaomi Corp.’s offerings in China, while General Motors Co. is gaining in the US electric-car market.

Tesla told investors back in April that new vehicles, including more affordable models, remained on track to go into production during the first half of the year. Cheaper new cars didn’t materialize, leading several analysts to speculate they may be delayed.

Most analysts now expect Tesla to report its second consecutive annual decline in vehicle sales. Analysts surveyed by Bloomberg are on average projecting the company will deliver around 1.65 million vehicles in 2025, a roughly 8% drop from 1.79 million last year.

Tesla management already have backed away from their prediction in January that the vehicle business would return to growth this year, with executives cautioning in April that they would revisit their outlook when reporting earnings this month.

Musk then told Bloomberg News on May 20 that Tesla’s deliveries had recovered, and that the company didn’t anticipate any meaningful shortfall going forward.

“The sales numbers at this point are strong and we see no problem with demand,” the CEO said in an interview at the Qatar Economic Forum.

Musk diverted investor attention away from vehicle sales toward the end of the quarter by launching a long-promised driverless taxi service. While Tesla only offered rides to a small contingent of fans in a confined area of Austin — and footage of several drives drew scrutiny from federal safety regulators — Tesla’s shares rose 23% during the three-month period.

The CEO is now taking on more oversight of the company’s car business following the departure of close confidant Omead Afshar, who was responsible for Tesla’s sales and manufacturing operations in North America and Europe.

Tesla’s sales operations in the US and Europe will now report up to Musk, while Tom Zhu, a senior vice president, will continue to oversee sales in Asia and take over manufacturing operations globally, Bloomberg reported Tuesday, citing people familiar with the matter.