Tesla (TSLA.O), the inventor of Electric Vehicles (EV) around the globe delivered a record number of cars in Q4, beating all market expectations and achieved its target for the year 2023, but it lost the top EV maker spot to China’s BYD (002594.SZ) .
Tesla delivered a total of 494,989 EVs in Q4, making it a record sale, however, it fell short of Warren Buffet’s backed BYD that sold 526,409 vehicles, mostly in China.
While Tesla’s supply chain push in the last quarter paid off, helping it to deliver 1.8 million EV in 2023, it fell short of Elon Musk’s target of 2 million vehicles. Though, it is still ahead of China’s BYD in the annual data.
Moreover, Tesla’s stock, which almost doubled last year, remained flat on the ground on Tuesday in a weak equities market during the first week of 2024.
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BYD’s Price Cuts
The main reason why Tesla lost its top EV maker spot to China’s BYD, despite delivering a record number of cars in Q4 is the price cuts implemented by the Chinese automaker.
Susannah Streeter, head of money markets at Hargreaves Lansdown said that, “BYD’s deliveries show price cuts are working for them. Though this fight will hurt margins for both companies in the shorter run, but BYD clearly believes it’s a price worth paying to increase its market share and recognition.”
Following BYD’s price cuts, Tesla also started offering incentives and discounts, like free fast charging for the first six months for customers taking deliveries in December, in a bid to increase sales before the year end and before some variants of its model 3 sedan lose US tax credits in 2024.
These discounts helped Tesla instantly to record a growth of 11% over previous quarter and to beat the estimates of 473,253 units initially expected by analysts.
Gary Bradshaw, portfolio manager at Tesla shareholder Hodges Capital said that, “Tesla’s delivery numbers are much, much, much better than domestic U.S. car companies.” Its rival Rivian (RIVN.O) also reported its deliveries for the fourth quarter on Tuesday, with them missing the estimates amid a major setback in the EV demand.
This slow demand has cautioned other US automakers including General Motors and Ford about their EV production plans.
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US Tax Credits
Analysts are of the view that Tesla might have to continue offering discounts and price cuts, which it started in January 2023 to increase EV demand, after the end of the tax incentives under the Inflation Reduction Act (IRA).
Seth Goldstein, an equity strategist at Morningstar while giving an interview to the media said that, “Tesla may have to cut prices further, especially for a vehicle like the versions of the Model 3 that lost their tax credit.”
However, he noted that price cuts implemented by Tesla were in response to a higher interest rate in the country, which will start falling in 2024.
Tesla’s long-range and rear-wheel drive variants can no longer avail Federal tax credits of up to $7500 as upgraded requirements on battery material supply have been introduced. Model 3 and Model Y have been the top selling variants of Tesla accounting for 461,538 units in quarter 4 while the remaining 23,000 belonged to other variants of Tesla.
