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Tesla Demand: Hitting the Brakes

January 7, 2019
Tesla demand

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Tesla has been the talk of the town lately… but how is business going now for the electric car company? Apparently, Tesla demand is slowing. The company made over 9,000 more vehicles than they delivered last year. This brought up concerns for analysts of the industry that the inventory is growing as the demand is slowing.

Demand

If the demand falls farther, Tesla will need to cut production or prices… and so they did just that last Wednesday. They cut $2,000 from each of the three models, claiming that the price change will help their customers with the loss of a federal tax credit. It used to be $7,500 and was recently lowered to $3,750. The federal tax credit will keep going down until it hits zero at the end of the new year.

According to Gartner analyst Michael Ramsey: “They have for a long time had more demand than supply. It’s becoming apparent that that dynamic is changing.” How? Well, Tesla’s fourth quarter numbers didn’t quite reach expectations. The company claimed to have delivered 90,7000 vehicles from October through December. The expectation, polled by data provider FactSet, was 92,000.

Jeff Schuster, senior vice president at LMC Automotive, said that the demand for the Model 3 has been artificially high while Tesla dealt with issues in production at the factory in Freemont, California. Deliveries were delayed; therefore, customers were still waiting for vehicles. Now, they have reached more of a middle ground.

Inventory

And yet… inventory is going up. At the end of last year, Tesla parked hundreds of models at lots and stores throughout the nation. This could demonstrate an excess in stock, but it is not entirely clear. While the company would not give its exact numbers, they did state that they had lower stocks than both Mercedes and BMW. In fact, last week they stated: “Our inventory levels remain the smallest in the automotive industry.”

In addition, Tesla expects sales for the Model 3 to grow throughout the world soon. Distribution is set to expand and they will offer leases. Europe and China deliveries start next month. So, it is unclear what the company has in store and if the Tesla demand will continue to drop or begin to grow again. Analysts will be on the lookout to see how the electric car company fares for the year 2019.

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