Tesla: First-Quarter Deliveries Show Surprising Decline

Key Morningstar Metrics for Tesla

• Fair Value Estimate: $195.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Very High

Tesla TSLA announced 2024 first-quarter deliveries of 386,810 vehicles, down roughly 8.5% versus the first quarter of 2023. We have updated our model to assume that full-year 2024 deliveries come in roughly flat versus 2023 at a little over 1.8 million vehicles, down from our prior forecast for 10% growth. With our long-term outlook largely unchanged, we’ve reduced our fair value estimate for Tesla to $195 per share from $200. Our narrow moat rating is unchanged.

Tesla shares were down 5% at the time of writing, as the market reacted negatively to the decline in deliveries. At current prices, we view Tesla shares as slightly undervalued, trading around 15% below our updated fair value estimate, but still in 3-star territory. Accordingly, we recommend investors wait for shares to offer a larger margin of safety before considering an entry point.

Management attributed the decline to the production ramp-up of the updated Model 3 at the company’s California factory, as well as factory shutdowns from shipping diversions caused by the Red Sea conflict and an arson attack at Gigafactory Berlin. While those events caused vehicle production to fall around 2% versus the first quarter of 2023, in our view, the larger deliveries decline points to a slowdown in demand for Tesla’s vehicles, as competitors may have cut prices more than the firm to win consumers, particularly in China.

While we were surprised by the decline, we assumed Tesla would see slower growth in 2024 and 2025 as the market for its luxury vehicles approaches saturation. In the longer term, we still forecast around 5 million deliveries by 2030, largely driven by the affordable vehicle Tesla aims to launch by the end of next year. The company’s entry into this segment should drive delivery volume growth, while management’s plan to reduce unit production costs should help boost profit margins.