Tesla deliveries likely fell as competition, Musk backlash surge

By Akash Sriram and Abhirup Roy

(Reuters) -Tesla investors are bracing for a drop in first-quarter vehicle deliveries as a backlash against CEO Elon Musk's politics exacerbates weakening demand for the electric vehicle maker's aging lineup.

Musk promised Tesla would return to growth this year after its annual deliveries fell for the first time in 2024, and Wall Street will be watching to see how a refreshed Model Y SUV and incentives made a difference.

Tesla has been grappling with rising competition, especially in China and Europe, and protests against Musk's role overseeing cuts to federal spending as an adviser to U.S. President Donald Trump. This has angered a largely liberal base of Tesla buyers, and data has shown Tesla owners trading in their vehicles at record levels.

"We have seen major brand deterioration of Tesla across the entire world essentially," said Ken Mahoney, CEO at Mahoney Asset Management, which owns Tesla stock. "The brand has become far more politicized than any public company's brand should wish to be." 

Tesla is set to report its first-quarter deliveries and production numbers on Wednesday. Its shares were down more than 7% on Monday and have fallen 35% this year.

Wall Street expects Tesla to have delivered about 373,000 vehicles in the January-March period, according to an average of 15 analysts' estimates from Visible Alpha that were refreshed in the past 30 days to reflect growing demand concerns. That would be a 3.6% drop from the same period a year ago, when it delivered 386,810 vehicles. 

Even the updated average estimate may be too optimistic, according to some investors and analysts. 

"I think that the numbers are going to come in below 400,000 and, maybe as low as 350,000," said Thomas Martin, senior portfolio manager at Tesla shareholder Globalt Investments.

Deutsche Bank analysts expect between 340,000 and 350,000 vehicles to have been delivered.

The company and Musk did not respond to requests for comment.

Data from auto associations and analyst estimates has shown sharp drops in Tesla sales in the first two months of the year in the U.S., Europe, and China.

Adding to the malaise about the economy that has curbed people's appetite for big-ticket purchases, demand for Tesla cars has also been hit as some potential customers waited for a refreshed version of the top-selling Model Y.

Tesla started selling the updated Model Y, which now comes with full-width front and tail lights, a rear-seat touchscreen, and improved interiors, late last month in China and this month in the U.S. and Europe. 

"The refreshed Model Y could boost demand, but it may be prolonged a bit as many customers could be waiting for the launch of a more affordable vehicle," said David Wagner, head of equity and portfolio manager at Aptus Capital Advisors.

Tesla has said it would launch a more affordable model based on existing platforms this year but has not offered details.

Demand for Tesla's Cybertruck pickup that rolled out in late 2023 after several delays has also been cool, with its polarizing trapezoidal design and higher-than-promised price tag keeping buyers at bay. Quality concerns have plagued the model, and Tesla recalled nearly all Cybertrucks in the U.S. this month to fix an exterior panel that could detach while driving.

TESLA TAKEDOWN

The company has been offering discounts and other incentives, including low-cost financing.

But these seemed to have had little impact in Europe, where sales declined in the first two months of the year. People have been turned off by Musk's support of right-wing politics. 

Sales of China-made Teslas fell as well. Chinese rivals including BYD have ramped up a price war and launched at least six models in the past year to take on the Model Y.

"Tesla Takedown" protests in countries including Germany and Finland have amplified criticism against Musk in the U.S., where he has been instrumental in driving reductions in the federal workforce and the termination of humanitarian initiatives.

Teslas have been lit on fire in Las Vegas, and incidents of vandalism at Tesla stores have spiked. Trump has said perpetrating violence against Tesla dealerships will be labeled domestic terrorism.

Tesla is likely to be less affected than rivals by Trump's latest 25% tariffs on imported vehicles and parts. Tesla brings in fewer parts than other automakers from outside the U.S. and makes domestically all cars it sells in the U.S.

Still, Musk has said the cost impact from tariffs will not be trivial. Tesla has also warned it is exposed to retaliatory tariffs that could be leveled in response to Trump's levies.    

(Reporting by Akash Sriram in Bengaluru and Abhirup Roy in San Francisco; Editing by Sayantani Ghosh and Rod Nickel)