Quarterly delivery announcements are like Christmas for Tesla fans and investors. The question typically isn’t whether the world’s most valuable car company grew sales and manufacturing capacity, but by how much. However, the first three months of 2024 were Tesla’s bleakest in years. 

Tesla shipped 386,810 vehicles to customers, a 20% drop over Q4 2023 and an 8.5% drop over Q1 of last year. This was the first year-over-year quarterly decline since the pandemic-related disruptions of 2020. 

Get Fully Charged

Tesla's sales slow down

Tesla's sales have stayed on an upward trajectory for years, largely due to being a high-growth player in a wide-open market. A bad quarter of sales highlights a demand problem Elon Musk's company is facing. 

So is this just a symptom of the “slowdown” in electric-vehicle sales everybody’s talking about? Probably not. Given that some of Tesla’s rivals fared better, the story here is more complicated than that. The bad numbers show that Tesla can’t just rest on its laurels and expect to dominate EVs indefinitely. 

Breaking Down Tesla's Very Bad Quarter

Tesla, for its part, blamed shipping delays (caused by attacks on ships in the Red Sea), arson at its German car plant and a slow ramp-up for its redesigned Model 3 sedan. These may all be real headwinds Tesla is facing, but they don’t explain away Tuesday’s disappointing results.

The supply of Teslas isn’t the problem. Tesla cranked out some 433,000 cars from January through March, a whopping 47,000 more than it sold. That mismatch suggests a demand issue. Using a common metric for judging automaker inventory, Morgan Stanley analysts estimated in a recent research note that Tesla has 24 days of vehicle supply across the globe. “If not a record high, this represents a multi-year high,” the analysts said. 

Get the InsideEvs Newsletter
Sign Up Today

Several factors—both in Elon Musk’s control and outside of it—are at play here. 

For starters, Tesla’s lineup is getting old. It needs new products to expand its reach. The Model 3 sedan just got its first major redesign in several years. The Model Y SUV, Tesla’s top seller, is going on four years without a makeover. Industry experts have long warned that those two models, which make up the bulk of Tesla’s global sales, are reaching saturation in the marketplace. 

Tesla EVs at V4 Supercharging station. From left: Model 3, Model S, Cybertruck, Model X and Model Y

Sure, the angular, stainless-steel Cybertruck pickup just went on sale. That’s new. But it’s expensive and polarizing—not exactly the volume seller Tesla needs. Tesla is working on a cheaper, smaller EV, though production isn’t slated to start until late 2025

Tesla has acknowledged the problem at hand. It said in January that it’s “between two major growth waves,” which is a charitable way of saying “things may get ugly.” All eyes will be on whether the dashing new Model 3 can shepherd Tesla through this rough patch until the cheaper car arrives. If things keep going poorly, the decision to prioritize the Cybertruck over a more mass-market offering will look increasingly baffling over time.


Unfortunately for the carmaker and its customers, the Model 3 became ineligible for the $7,500 federal tax credit in January after new rules governing China-sourced parts kicked in. That certainly isn’t doing any favors for sales, and neither are persistently high interest rates for car loans. 

Elon Musk’s habit of being extremely online isn’t helping either. The CEO’s caustic rhetoric and boosting of far-right talking points is alienating customers, studies have shown

Meanwhile, competition in the EV world is fiercer than ever. Unlike a few years ago, consumers have their pick of a ton of good EVs that aren’t Teslas. That’s particularly true in China, the world’s largest car market, where an onslaught of homegrown rivals are selling high-tech cars for bargain-bin prices

Even in the U.S., some other EV makers did better than Tesla last quarter. Hyundai’s first-quarter EV sales grew by 62%. The American EV startup Rivian sold 13,588 vehicles, beating Wall Street analyst expectations. Of course, both are starting from a much lower baseline than Tesla, which makes growth easier.

2023 Hyundai Ioniq 6 Review

BYD, the Chinese behemoth that’s put the entire Western auto industry on notice, reported 13.4% year-over-year growth in EV sales. But compared to its phenomenal performance in Q4 of 2023, it performed even worse than Tesla. 

Where Does Tesla Go From Here?

So what’s Tesla been doing to mitigate things? 

Most notably, it slashed prices considerably last year, slicing its historically fat margins to levels that are more comparable to its automotive peers. That makes all of this even more worrisome for investors, who were willing to stomach slimmer profits on each car so long as Tesla managed to boost volumes as a result. But declining profits and declining sales are what’s known on Wall Street as a “big yikes.” Hence, Tesla shares sank 5% on Tuesday’s news. 

Tesla’s also been doing more traditional advertising lately on platforms like Google and YouTube. Historically, it leaned on word-of-mouth marketing and Musk’s celebrity to promote itself. And, in an apparent attempt to pad its bottom line, Tesla has been pushing the $12,000 driver-assistance feature known as Full Self-Driving harder than ever. (Just remember, that system isn’t actually autonomous.)

Elon Musk wants Tesla to be an AI and robotics company that gets rich off of self-driving cars and humanoid worker bots. But right now, Tesla is a car company facing car company problems.

It needs to sell more cars that buyers want. It needs to fend off competition from the Hyundais, Toyotas, GMs and BYDs of the world. As the market it created matures and flourishes, none of that is getting any easier.

Got a tip for us? Email: tips@insideevs.com