According to news on January 1, Tesla is expected to announce on Tuesday local time in the United States that its delivery volume in 2023 will reach a new high. That's largely thanks to the company's CEO Elon Musk's die-hard fan base and the support of a group of early adopters who are enthusiastic about the new technology. Today, Tesla is gearing up to expand its market appeal.
Analysts surveyed by Bloomberg predict that the electric car maker may successfully deliver nearly 483,200 vehicles in the fourth quarter of 2023. This means that Tesla may well have exceeded the 1.8 million vehicle delivery mark last year, which is already a record high for the company but still pales in comparison to the sales of traditional giants such as Toyota or General Motors.
However, to achieve the next stage of leapfrog growth, Tesla must win the hearts and minds of ordinary consumers. When these consumers choose a car, the most important thing is price and practicality. Tesla’s Chief Financial Officer Vaibhav Taneja admitted in an investor call last October: “Looking at the overall car buying trend, we are working hard to attract the next wave of electric vehicle users.”
But achieving this goal will not be easy. Tesla faces many challenges, including inflation and high interest rates that make consumers more hesitant to make big-ticket purchases. At the same time, many potential buyers also have doubts about the safety of electric vehicles and the completeness of charging facilities. Moreover, as more and more electric vehicle brands enter the market, consumers who plan to switch from fuel vehicles to electric vehicles also have more choices.
To make matters worse, starting from January 1, 2024, some Tesla models are expected to lose up to $7,500 in federal electric vehicle tax credits due to stricter regulations on battery component procurement in the United States taking effect. The company pointed out on its official website that some versions of Model 3 will be affected.
In order to enter the mass market, Tesla has spent a lot of money in 2023. The company has slashed prices on all models to boost sales at the expense of profit margins. Especially in China, which Musk calls "the most competitive market," Tesla's price cuts are even more astonishing.
However, even so, Tesla still faces challenges from rising stars such as BYD. BYD's product line is being updated very quickly, putting Tesla under unprecedented pressure. Musk admitted in October last year that Tesla's much-anticipated futuristic electric pickup truck, the Cybertruck, has not yet reached mass production and is at least a year away from profitability. Analysts estimate the company may have delivered only 200 to 5,000 pickup trucks in the fourth quarter.
Tesla has not yet given a number of cars expected to be delivered in 2024. The company first launched the Model 3 sedan and Model Y SUV in 2017 and 2020 respectively. These two models accounted for about 97% of this year's deliveries.
"It's hard to fathom how much material improvement underlying demand could materially improve in an increasingly competitive EV space with an aging product lineup and no further price drops," Bernstein analyst Toni Sacconaghi wrote in a latest research note to clients. "More importantly, we don't think the situation will change much in 2025." Sacconaghi has a "sell" rating on Tesla stock.
Tesla does have some leverage to drive future sales. In 2023, the company improved the Model 3 sedan to give it a sleeker appearance and longer driving range. Tesla first launched the car in China and then sold it in Europe. The new Model 3 is expected to be launched in the United States in 2024, but Tesla has not yet determined a specific time. Additionally, the company is said to be planning to launch the new Model Y at its Shanghai factory.
Tesla is also expanding its marketing efforts. The company has built a strong brand without paying for traditional advertising, but it recently started experimenting with Google Ads. Currently, Google ads are promoting the possibility of leasing a Model Y for $399 per month.
Owuraka Koney, managing director of Jennison Associates, which owns Tesla shares, said he believes the electric car maker is doing a lot to attract the next wave of potential customers.
The Cybertruck has attracted many curious buyers to Tesla stores. In addition, Coyne also said that in addition to Musk, Tesla executives such as design director Franz von Holzhausen and vice president of automotive engineering Lars Moravy are doing more to promote Tesla products on behalf of the company.
"If you look at global electric vehicle sales, you will find that BYD and Tesla are still the main forces driving sales. Going forward, Tesla will continue to be well-positioned," Coyne said.