Tesla Accused of Severe Inventory Backlog, Q1 Sales "Cool Down"

Tesla Accused of Severe Inventory Backlog, Q1 Sales "Cool Down"

Tesla is facing a severe inventory crisis.

On June 9, according to Sherwood News, Tesla reported production of 433,371 vehicles in the first quarter of 2024, but only sold 386,810 vehicles, a year-over-year decline of 8.5%. This means 46,561 vehicles remained unsold. To store this unsold inventory, Tesla has opted to pile them up in parking lots, with such large quantities that they can even be seen from space.

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Tesla CFO Vaibhav Taneja stated that the increase in inventory is mainly due to a misalignment between production and orders.

Accusations of Severe Inventory Backlog

According to Sherwood News, utilizing images provided by SkyFi, a company offering satellite imagery services, a comparison of satellite images from October 2023 and March 2024 of Tesla's Gigafactory in Texas and Nevada reveals that the parking lots around the factory have gone from partially or nearly full to completely packed.

Satellite images show that in October 2023, the lower left area of the Texas Gigafactory was at 0% capacity, and the middle right parking area was at 17%. By March 2024, these figures had risen to 34% and 97%.

In addition to the Gigafactory, Tesla is storing unsold vehicles in other parking lots across the US, such as outside the Chesterfield Mall in St. Louis. Satellite images provided by Sherwood News show that in October 2022, this parking lot was empty, but by May 2024, it was full, holding nearly 500 Teslas.

An automotive supply chain practitioner commented on this situation: "Usually, car companies expand production capacity in advance to achieve economies of scale and reduce costs, spreading fixed costs to lower unit costs. However, this can also lead to a short-term surplus in production over market demand, resulting in a backlog."

Analysis and Market Situation

Analysts suggest that "Tesla has long been the top-selling electric vehicle in the US, consistently leading the charts. If sales in the US are underperforming or below expectations, it may indicate a slowdown in the growth of the US electric vehicle market."

Globally, Tesla accounted for 51.3% of the total US electric vehicle market sales in the first quarter of 2024, but quarterly sales dropped 8.53% year-over-year and 20.2% compared to the fourth quarter of last year. Additionally, in the first quarter of 2024, the US automotive market sold a total of 268,909 electric vehicles, a year-over-year increase of only 2.6% and a decrease of 15.2% quarter-over-quarter, indicating a significant slowdown in growth.

The first quarter of 2024 marked the first decline in the market share of electric vehicles in the US in four years, primarily due to a drop in sales of battery electric vehicles (BEVs). According to Wards Intelligence, in the first quarter of 2024, the share of hybrid, plug-in hybrid, and battery electric vehicles in the total sales of US light-duty vehicles fell from 18.8% in the fourth quarter of 2023 to 18.0%.

"Considering cost-effectiveness and convenience, American consumers tend to prefer gasoline or hybrid vehicles. Additionally, Americans have traditionally favored SUVs and trucks, categories in which battery electric vehicles are less represented," an industry insider noted.

Consumer Preferences and Model Updates

It is worth mentioning that a recent ranking of consumer-preferred vehicles by Consumer Reports included six hybrid models in the top ten, with only one electric model, the Tesla Model Y, making the list, alongside three gasoline models.

As the second-largest market for Tesla globally, Tesla’s retail sales in China for the first quarter of 2024 were 132,400 vehicles, accounting for 30.57% of Tesla's global production, but down 3.64% year-over-year. According to data from the China Passenger Car Association on June 4, Tesla’s Shanghai Gigafactory delivered 72,573 vehicles in May 2024, with sales in China exceeding 55,000 units, a month-over-month increase of 77% and a year-over-year increase of 29.9%, capturing a 3.2% market share. Despite the impressive May sales, total sales for the first five months still fell by 0.5%.

Regarding the slowdown in Tesla’s sales in China, an automotive analyst from Western Securities commented: "For instance, in the domestic market, some manufacturers update their models annually, whereas Tesla might only refresh its models every two to three years. Although a new high-performance Model 3 was released in April, its positioning and price make it less appealing to consumers."

Currently, Tesla’s available models include the Model 3, Model Y, Model S, Model X, and Cybertruck, with the Model Y and Model 3 being the main models sold in China. Data shows that in the first quarter of this year, the Model Y sold about 100,400 units in China, accounting for 80% of Tesla’s total sales.