Tesla’s Sales Decline Attributed to Houthi Attacks and Arson in Germany

Crucially, Tesla shipped fewer cars than it did in the first quarter of 2023, meaning this was the first year-over-year drop in sales in three years. Production was also down year-over-year, which Tesla attributed to switching to making the new Model 3, as well as the other disruptions. These drops come just two months after Tesla warned that sales growth could be “notably lower” in 2024 as it comes off a successful 2023 fueled by price cuts. Bloomberg News reported last month that Tesla curtailed output at its Shanghai factory as a result of slower sales growth in the country. Tesla tried to pull a few tricks at the end of the quarter to boost sales, as it usually does.

Tesla recently reported their first quarter delivery numbers for 2024 and it appears to be a disappointing start for the company. However, the blame is being placed on external factors such as an arson attack at the Germany factory and shipping disruptions caused by Houthi attacks in the Red Sea.

According to Tesla, they delivered 386,810 vehicles in the first quarter, a 20% decrease from the previous quarter’s 484,507 deliveries. This also marks the first year-over-year drop in sales in three years, with Tesla shipping fewer cars compared to last year’s first quarter.

The decrease in production is also being attributed to the switch to manufacturing the new Model 3, along with other disruptions caused by the arson attack and shipping issues in the Red Sea. These events resulted in the Germany factory shutting down for almost a week, with production suspended for two weeks in January. As a result, Tesla’s stock fell by 6% in early trading.

This decline comes on the heels of Tesla’s warning just two months ago, stating that sales growth for 2024 could be significantly lower compared to the previous year’s success due to price cuts. The company also acknowledged that they are currently in between two major growth waves as they focus on ramping up production for the Cybertruck. They also have plans for a lower-cost EV, though these plans have been altered and the company is now working on a new manufacturing process to decrease costs.

In addition to these challenges, Tesla is also facing increased competition in China as more companies, both big and small, flood the market with low-cost EVs. In fact, Bloomberg News reported that Tesla had to reduce production at their Shanghai factory due to slower sales growth in the country.

In an attempt to boost sales towards the end of the quarter, Tesla offered a one-month free trial for their advanced driver assistance software, which they refer to as Full Self-Driving, despite not being fully autonomous. They also hinted at a price increase starting April 1st, a strategy they have used in the past.