Tesla Meets 2023 Delivery Guidance But Loses EV Crown to BYD

Tesla (NYSE: TSLA) produced 494,989 cars in the fourth quarter and delivered 484,507 of these which took its annual deliveries to just above 1.8 million.

Tesla’s 2023 deliveries rose 38% YoY and were in line with the toned-down guidance as the company was originally looking to produce 2 million cars in the year. Also, it is the second consecutive year that Tesla failed to increase its deliveries at a CAGR of 50% that the company’s CEO Elon Musk once touted. Nonetheless, the deliveries were ahead of the 477,000 that analysts were expecting and were a new record for the company, ahead of the previous record deliveries of 466,140 vehicles in the second quarter of 2023.

Tesla released 2023 deliveries: Key takeaways

Meanwhile, looking at Tesla’s Q4 delivery report, the company delivered 18,212 Model S/X cars which were 3.7% of the total deliveries. The remaining deliveries were for the lower-priced Model 3/Y. Tesla does not provide a breakdown of individual models but the Model Y SUV is expected to have been the best-selling model globally in the first quarter of 2023, after excluding pickups.

It would be the first time when an all-electric model was the best-selling car, which is a testimony of how Tesla has catapulted itself into the rank of major automakers.

BYD becomes the largest seller of EVs

Last year, BYD became the world’s largest seller of new energy vehicles – which includes both battery electric cars and hybrids. The Chinese EV giant delivered over 3 million cars in 2023 which was in line with its guidance. Importantly, it delivered 525,409 electric cars in Q4 which was ahead of Tesla.

While Tesla is still the EV market leader in terms of full-year EV deliveries, BYD was the biggest global seller of EVs in Q4. The bulk of BYD’s sales however come from its home market of China even as it is trying to expand into new geographies.

Tesla has seen a margin compression

Meanwhile, Tesla still holds the pole position in the US EV market and leads the competition by a wide margin. That said, the company has had to lower vehicle prices to spur sales.

Tesla has started an EV price war and has lowered car prices multiple times. Due to the frequent price cuts, its operating margins fell below 8% in the third quarter of 2023. While its margins are still among the highest globally, they are now less than half of what they were before the price war.

Tesla is also expected to announce a new low-cost vehicle platform. The company’s cars are still costlier as compared to some peers and a low-priced model would help it increase the target market.

Musk talked about the company’s upcoming low-cost car which some have long dubbed as the “Model 2.” His comments come a few days after Tesla began deliveries of its long-awaiting Cybertruck which received a mixed response.

In an interview with Sandy Munro – a car industry veteran and owner of Munro & Associates – Musk said, “We are working on a low-cost electric vehicle that will be made at very high volume.” He added, “We’re quite far advanced in that work. I review the production line plans for that every week.”

Elon Musk has said that while the price cuts have dented margins, the company would prioritize shipment growth over margins in order to increase EV adoption.

Automakers have gone slow on EV expansion

Meanwhile, amid the price war and the rising losses, many automakers have turned cautious on the ambitious EV plans. For instance, General Motors is scaling back investments and would not go forward with the proposed EV joint venture with Honda Motors to produce small electric cars.

Ford is also cautious on its EV investments amid lower-than-expected sales and rising losses. The legacy automaker expects its EV business to lose $4.5 billion in 2023 which is higher than its previous forecast of $3 billion pre-tax loss. Ford also scaled back its EV production targets and expects to hit an annual EV production capacity of 600,000 EVs only by 2024 versus the previous guidance of 2023.

Commenting on the 2 million EV production guidance by 2026, Ford said, “we maintain flexibility on where we reach when we reach two million total EV global capacity because we are balancing growth, profitability, and returns.”

Tesla is planning a low-cost model

Last month, Musk talked about the company’s long-rumored low-cost car. His comments come shortly after Tesla began deliveries of its Cybertruck pickup.

In an interview with Sandy Munro – a car industry veteran and owner of Munro & Associates – Musk said, “We are working on a low-cost electric vehicle that will be made at very high volume.” He added, “We’re quite far advanced in that work. I review the production line plans for that every week.”

Tesla is also somewhat circumspect about the near-term demand outlook. The company announced the Mexico plant earlier this year but during the Q3 2023 earnings call, Musk said, “we’re laying the groundwork to begin construction and doing all the long lead items, but I think we want to just get a sense for the global economy is like before we go full tilt on the Mexico factory.”

Musk has blamed higher interest rates for lower car sales

Musk has blamed the Fed rate hikes and believes that higher interest rates are causing a slowdown. During the Q3 earnings call, he said, “I am worried about the high interest rate environment that we’re in. I just can’t emphasize this enough, that the vast majority of people buying a car is about the monthly payment. And as interest rates rise, the proportion of that monthly payment that is interest increases naturally.”

Meanwhile, Tesla shares are trading flat in early US price action today even as US rival Rivian is down sharply after the company’s Q4 deliveries fell short of estimates. Elsewhere, NIO, Li Auto, and Xpeng Motors are also trading lower after their delivery reports.

Xpeng Motors and Li Auto reported record deliveries in December and Li Auto became the first emerging Chinese EV maker to report deliveries over 300,000 in a year and also hit the milestone of 600,000 cumulative deliveries.