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Tesla sales are slow as the pandemic peaks in production

Tesla said on Saturday that vehicle deliveries from April to June fell 18 percent from the first quarter of the year, a rare decline for the company caused by manufacturing problems in China.

Tesla sells more electric cars than any other company, and until recently has expanded rapidly in China, Europe and the US as the rising price of petrol increased the appeal for battery power. Other carmakers envied Tesla’s growth rate.

Tesla delivered more than 254,000 vehicles in the quarter compared to 310,000 in the first quarter. It was the first quarterly decline in deliveries since the beginning of 2020, when the outbreak of the pandemic undercut car sales worldwide.

Tesla’s sales would probably be even higher if not for closures and supply chain problems, related to the pandemic, which hampered operations at the company’s Shanghai plant. China has the world’s largest car market and accounts for around 40 percent of Tesla sales.

Production in China was “an absolute disaster in the months of April and May,” Daniel Ives and John Katsingris, analysts at Wedbush Securities, said in a note to investors this past week.

Tesla indicated that they had overcome the production problems, and said that they built more cars in June than ever before in history.

Tesla has more orders than it can fill, but demand may decline if the global economy hits a speed bump. Elon Musk, Tesla’s CEO, warned in an interview with Bloomberg News in June that a recession was “inevitable at some point” and that “more likely than not” would come soon. He has told employees that the company will cut 10 percent of the payroll.

Tesla does not seem to match the growth from last year, when deliveries rose 90 percent to 940,000 cars. An increase of 50 percent for 2022 is more realistic, Wedbush analysts said.

That, they said in a note on Saturday, is still “an impressive feat” given that China “was essentially shut down for two months.”

The lower growth rate is a factor that has led investors to reconsider Tesla’s chances of dominating the automotive industry. Tesla shares have fallen more than 40 percent from their peak in November, although more and more buyers are choosing electric cars because of their superior energy efficiency.

Depending on local usage prices, an electric car costs significantly less to operate than a fossil car. A Tesla Model 3 standard series gets the equivalent of 142 miles per gallon and costs $ 450 per year for fuel, according to the Environmental Protection Agency. By comparison, a Honda Accord with a gasoline engine gets 33 miles per gallon and costs $ 2,200 per year to fuel.

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