Tesla sales increase by 38% from successful year-end price reductions

Tesla sales increase 38% and set a new record for the number of electric vehicles delivered in the fourth quarter, exceeding market expectations and achieving its 2023 target of 1.8 million vehicles. This was attributed to a year of price reductions and a surge in sales at the end of the year, significantly contributing to Teslas success.

The automaker delivered 494,989 vehicles in the fourth quarter, which was slightly less than the 526,409 fully electric vehicles delivered by Chinas principal global competitor, BYD. However, it is important to note that BYDs annual sales totaled 3.02 million vehicles, though this included approximately 1.4 million plug-in hybrid EVs. Despite this, Tesla remained ahead of BYD with respect to wholly electric vehicle sales for the year.

The fact that BYD’s sales have increased indicates that its pricing strategy has been beneficial. Susannah Streeter, the head of money and markets at Hargreaves Lansdown, suggested that the ongoing battle to gain a larger share of the market may lead to a margin decrease for both companies. Nevertheless, it is evidently a price worth paying for BYD to capture a larger segment of the market and establish itself as a recognizable competitor in the industry.

Tesla Increase Price Cuts

Tesla intensified its price cuts and introduced various incentives, such as six months of free fast charging, for customers who took delivery of their vehicles by the end of December. This was an effort to boost sales before some variants of its compact Model 3 sedan lost U.S. federal tax credits in 2024. As a result of these measures, Tesla achieved an 11% growth in the fourth quarter, exceeding the estimates of 473,253 vehicles, according to a poll conducted by 14 analysts from LSEG.

Tesla sales increase in the fourth quarter with an output of 494,989 vehicles constitutes a new record, especially since the third quarter experienced a production suspension for the enhancement of assembly lines. This brought total production in 2023 to 1.85 million units. Despite this achievement, Tesla shares remained stable amidst a generally weaker market.

Stronger Deliveries than other US Brands

According to Gary Bradshaw, a portfolio manager at Hodges Capital, Teslas 38% increase in delivery numbers is not the 40% growth that CEO Elon Musk aimed for, but it is still substantially stronger than that of domestic U.S. car companies. Additionally, Tesla’s smaller rival, Rivian, reported deliveries on Tuesday that fell short of market forecasts due to a broader decrease in demand for electric vehicles. Consequently, there has been an increase in caution from leading U.S. automakers such as Ford and General Motors regarding their plans for EV production capacity.

Tesla has come under scrutiny from regulators for its self driving technology, culminating in a recall of over 2 million vehicles last month. This recall was linked to the installation of new protective measures in its Autopilot advanced driver assistance system following concerns about safety raised by a federal safety regulator. Consumer Reports, a notable U.S. non profit organization that conducts comprehensive evaluations of cars and consumer goods, stated that its preliminary assessment suggested that the software update to rectify issues may not have been adequate in preventing misuse and driver inattention.

Tax credits

Some analysts speculated that Tesla may need to continue the price reductions it initiated in January of the previous year in order to maintain demand after the cessation of the tax incentives brought about by the Inflation Reduction Act (IRA). The phenomenon of advancing sales into the fourth quarter is related to this development. According to Seth Goldstein, an equity strategist at Morningstar, Tesla may have to further reduce prices, particularly for certain versions of the Model 3 that no longer benefit from a federal tax credit of $7,500 this year, due to updated requirements regarding the sourcing of battery materials stipulated by the IRA.

Despite the Tesla sales increase, Goldstein also suggested that most price cuts were made in response to higher interest rates from the U.S. Federal Reserve. Therefore, if borrowing costs start to decline, Tesla may maintain its current prices. In terms of sales in the fourth quarter, Model 3 cars and Model Y sports utility vehicles accounted for 461,538 sales, while roughly 23,000 units of other models were also delivered. However, it was not disclosed if the sales included the newly launched Cybertruck.

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