- Tesla's rough first quarter may signal more trouble ahead.
- Simply lowering prices may not be enough to capture new EV buyers.
- Analysts are beginning to worry about serious demand issues.
Electric-vehicle leader Tesla is finally starting to feel the pinch of a slowdown in EV sales that is already rocking the rest of the industry.
Elon Musk's car company reported its lowest quarterly deliveries since 2022, notching its first year-over-year quarterly decline since 2020 and biggest-ever miss compared to analyst expectations.
This rough quarter is the first sign that the EV leader is not immune to a slowdown in electric vehicle sales that has dogged its competitors since the latter half of 2023.
So far, Tesla has largely been able to keep up with a changing demographic of electric vehicle shoppers by flexing its hefty profit margins to lower prices.
But even its inexpensive Model 3 and Model Y saw deliveries tumble 10% from the same period a year ago and 20% from the previous quarter.
Is Tesla ready for the next wave of EV buyers?
For the newest electric car shoppers in the market, simply lowering prices may not be enough to win them over.
A recent study from Boston Consulting Group found that next-wave EV buyers place more importance on vehicle running costs and purchasing from more well-established legacy brands.
Many of these shoppers gravitate to hybrids, which Tesla doesn't sell. BCG forecasts that the segments seeing the most hybrid demand will be mass-market and premium sedans, coupes, and crossovers — squarely in the segment where Tesla is the strongest.
BCG also found that only one vehicle currently meets consumers where they are on price, range, and charging time: Hyundai's Ioniq 6. The Model 3 "closely follows," BCG said.
Tesla attributed some of the Q1 decline in deliveries to production slowdowns related to a ramp-up of its refreshed Model 3 and factory shutdowns overseas.
Still, analysts are worried that Tesla's Q1 report points to a tougher year ahead.
"Beyond the known production bottleneck, there may also be a serious demand issue," Deutsche Bank's Emmanuel Rosner wrote in a Tuesday note to clients.
They'll have their chance to ask Elon himself on an earnings conference call scheduled for April 23.