E-vehicle-maker rides incentives to forecast-topping results
Low interest financing, sweet lease deals, price cuts and free charging drove Tesla's global deliveries higher in the third quarter, the first increase this year for the electric vehicle maker.
The Austin, Texas, company said Wednesday that it delivered 462,890 vehicles from July through September, bolstered by loans as low as 1.99%, and $299 monthly leases on the Model 3, its least expensive vehicle. It delivered 435,059 vehicles during the same period last year.
The figures for July through September came in slightly higher than analyst estimates of 462,000 for the period, according to data provider FactSet.
However, shares of Tesla Inc. fell $9, or 3.5%, to close Wednesday at $249.02
The deliveries were "good and a step in the right direction," wrote Dan Ives of Wedbush, but that there would be pressure on the company's stock because investors had been hoping for even better.
"Overall, this is a clear improvement from the first half," Ives said.
Tesla has struggled much of the year to sell its aging model lineup as growth in electric vehicle sales in the U.S. and Europe slowed because of concerns with range, price and the ability to charge on trips.
Falling sales early in the year led to once-unheard of discounts for the automaker, cutting into its industry leading profit margins. Analysts estimated that Tesla's average vehicle sales price was $42,500 for the third quarter, the lowest price in four years.
The sales decline likely will pull down third-quarter earnings when they are announced on Oct. 23.
It will be easier for the company to offer cheaper financing after the Federal Reserve cut interest rates by half a percentage point in September, the first of what is expected to be a series of cuts. Central banks in Europe, China and elsewhere have also been lowering rates.
Interest rates determine the size of monthly car payments and are often more important to buyers than sticker prices. That's why many analysts think car sales in the United States in particular could rise as the Fed cuts rates more.
"There is a contingent of folks who are going to say, 'Now is not the right time to commit $50,000 to a new vehicle,'" said Charles Chesbrough, a senior economist at Cox Automotive, a research firm. "They may just decide to wait a few months until after the election, until after the Middle East calms down, until they see if the Fed cuts rates further."
Tesla's sales decline comes as competition is increasing from legacy and startup automakers, which are trying to nibble away at the company's market share.
Nearly all of Tesla's sales came from the smaller and less-expensive Models 3 and Y, with the company selling only 22,915 of its more expensive models that include X and S, as well as the angular Cybertruck.
Wedbush analyst Dan Ives wrote in a note to investors Tuesday that third-quarter sales would bring a rebound as China sales continue to increase and price and demand stabilizes. "As China continues to heat up on the demand story for Tesla with favorable leasing/financing terms and pent-up demand in the region, we are confident that we will see a significant growth figure in the region," he wrote.
Europe will continue to be slow with macroeconomic pressures, and U.S. demand should stabilize, Ives wrote.
But BNP Paribas Exane said in an investor note that long term expectations of the market are somewhat high for Tesla. The company said its sales estimates for 2026 and 2027 "remain 10% to 15% below the street, respectively."
Tesla is scheduled to unveil a purpose built robotaxi at an event next week.
Sluggish car sales are expected to pick up later this year once the U.S. presidential election is over and the Fed's reversal on interest rates starts to ease financing costs.
Many car shoppers stayed on the sidelines in the most recent quarter, even with more discounts being offered and improved selection in showrooms. Americans bought an estimated 3.9 million cars and trucks in the third quarter, a 2.3% drop from a year earlier and off 4.7% from the second quarter, according to automotive research firm Edmunds.com Inc.
Industry analysts attribute that to a more prevalent wait-and-see attitude about lower rates and the outcome of the race between Vice President Kamala Harris and former President Donald Trump, which could affect tax rates and subsidies for electric vehicles.
"Consumers don't yet feel good about the future and confident that now is a good time to spend on big-ticket items," Jonathan Smoke, chief economist at research firm Cox Automotive, said on a Sept. 25 call with reporters. "But that's within reach for the first time in a long time."
Information for this article was contributed by The Associated Press, Jack Ewing and Neal E. Boudette of The New York Times and Keith Naughton of Bloomberg News.
FILE - Visitors look over a 2024 Cybertruck in the Tesla display at the Electrify Expo, July 14, 2024, in north Denver. (AP Photo/David Zalubowski, File)
FILE - A Tesla Model 3 charges at a Tesla supercharging station situated in the parking lot of an outlet mall Sept. 25, 2024, in Lakewood, Colo. (AP Photo/David Zalubowski, File)