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Tesla's Record-Breaking Fourth Quarter Delivery Surge
Tesla has achieved a milestone by delivering an unprecedented number of electric vehicles (EVs) in the fourth quarter, surpassing forecasted numbers and meeting its 2023 target of 1.8 million EVs. This reflects convincingly on the profitability of their year-end sales drive.
The automaker ramped up discounts, offering perks such as six months of free fast charging for customers who completed their purchases before the end of December. This move intended to bolster sales before certain versions of the popular Model 3 sedan were no longer subject to U.S. federal tax credits in 2024.
Tesla's Performance Figures
This strategy saw Tesla distribute 484,507 vehicles in the fourth quarter. That's an 11% increase from the quarter immediately preceding it and a figure that exceeded the average prediction of 473,253, which was made by 14 LSEG-polled analysts.
A record number of 494,989 vehicles were manufactured by the company in the same quarter. This came after a production halt for assembly line improvements in the third quarter. It resulted in a total production of 1.85 million units throughout 2023.
Despite these encouraging numbers, Tesla's shares held steady in a bearish market environment.
Rival Performance and Autonomous Safety Concerns
"Tesla's delivery results, boasting a 38% increase, may not have reached Elon Musk's 40% goal, but they certainly outperformed many domestic U.S. car producers," commented Gary Bradshaw, a portfolio manager at Hodges Capital, a shareholder in Tesla.
Competing EV maker Rivian also released its delivery figures on Tuesday, yet failed to meet market expectations against a backdrop of decreasing EV demand. This trend has prompted U.S. automakers such as Ford and General Motors to rethink their ambitious EV production strategies.
Tesla recently made headlines for its recall of over 2 million vehicles to implement additional safety features for its Autopilot driver-assistance system following regulatory concerns. Consumer Reports, a prestigious U.S. consumer watchdog, stated that their preliminary evaluation suggests the software enhancements were inadequate in addressing misuse of the system and driver distractions.
Effects of Tax Incentives
Analysts speculate that Tesla might have to persist with the price cuts it initiated in January last year to sustain demand, especially given the impending phasing out of the federal tax incentives brought forward by the Inflation Reduction Act (IRA), after these effectively boosted fourth-quarter sales.
With the IRA getting stricter regarding battery sourcing requirements, certain Model 3 models no longer qualify for federal tax credits of $7,500 in 2024. Meanwhile, Seth Goldstein, an equity strategist at Morningstar, pointed out that price cuts were mostly in response to the Federal Reserve's rising interest rates. Therefore, Tesla might decide to hold their prices steady if borrowing costs begin to decline.
During the quarter, Tesla delivered approximately 461,538 Model 3 and Model Y vehicles. Additionally, around 23,000 units of other Tesla models were also handed over to customers. However, Tesla did not reveal whether the recently launched Cybertruck was part of this delivery tally. Elon Musk previously stated that around 250,000 units of the radically designed EV pickup truck are planned for production in 2025.
