Tesla sales slow as pandemic slows down production

Tesla said on Saturday that vehicle shipments from April to June fell 18 percent from the first quarter of the year, a rare slowdown for the company, fueled by manufacturing problems in China.

Tesla sells more electric vehicles than any other company and has expanded rapidly in China, Europe and the US until recently as rising gas prices increased the appeal of batteries. Other automakers were jealous of Tesla’s growth rate.

Tesla over 254,000 vehicles delivered in the quarter compared to 310,000 in the first quarter. It was the first quarterly drop in deliveries since early 2020, as the onset of the pandemic crippled car sales around the world.

Tesla sales would likely have been even higher were it not for the pandemic-related shutdowns and supply chain issues that have hampered the company’s Shanghai plant. China has the world’s largest automotive market and accounts for about 40 percent of Tesla’s sales.

Manufacturing in China was “an absolute disaster in April and May,” Daniel Ives and John Katsingris, analysts at Wedbush Securities, said in a note to investors last week.

Tesla suggested it had overcome production challenges, saying it built more cars in June than at any time in its history.

Tesla has more orders than it can handle, but demand could dwindle if the global economy hits a speed bump. This was stated by Tesla CEO Elon Musk in an interview with the publication. Bloomberg News in June that a recession is “imminent at some point” and that it is “more likely than not” to come soon. He told employees that the company cut 10 percent its hired labor force.

Tesla is unlikely to achieve growth from last year, when deliveries rose 90 percent to 940,000 vehicles. A 50 percent increase by 2022 is more realistic, according to Wedbush analysts.

That, the memo said on Saturday, is still an “impressive achievement” given that China has been “virtually shut down for two months.”

The slower growth rate is one of the factors that made investors overestimate Tesla’s chances of dominating the auto business. Tesla shares are down more than 40% from their November peak despite more and more buyers opting for electric vehicles due to their superior energy efficiency.

Depending on local utility rates, the cost of operating an electric vehicle is significantly lower than that of a fossil fuel vehicle. The Tesla Model 3 has a standard range of 142 miles per gallon and costs $450 a year in fuel, according to the Environmental Protection Agency. By comparison, a gasoline-powered Honda Accord does 33 mpg and costs $2,200 a year in fuel.