Tesla falls 7% as first-quarter deliveries show growing inventory build-up and analysts say more price cuts may be needed

• Tesla shares fell 7% on Monday after the company announced its first-quarter vehicle deliveries.
• Tesla delivered 422,900 vehicles last quarter, beating Wall Street’s estimate of 421,500.
• Shares fell as Tesla’s vehicle inventory rose, suggesting to some analysts that it would need to enact more price cuts to spark demand.

Tesla shares fell as much as 7% on Monday after the company’s first-quarter deliveries suggested to some Wall Street analysts that more price cuts are needed to spark demand.

Tesla said it delivered 422,900 vehicles last quarter, beating Wall Street’s delivery estimate of 421,500 vehicles. The problem lies in the fact that Tesla produced 440,000 vehicles during the quarter, suggesting inventory continues to rise for the company.

In fact, according to a note from Barclay analyst Dan Levy, Tesla has produced about 75,000 more vehicles than it has delivered over the past nine months.

That could put Tesla in a tough spot as it tries to sell its inventory and could eventually lead to more price cuts.

“Incremental price cuts are likely needed amid inventory build-up, especially as production at the Austin and Berlin ramps [higher]Levy said.

And further price cuts, which already surprised the investment community in late 2022 and early 2023, would shift Wall Street’s focus away from vehicle delivery growth and instead toward the sustainability of Tesla’s gross margins.” , as some have questioned the ability to clear the target. [of] 20%,” Levy said.

Wedbush analyst Dan Ives pointed to that 20% target as the “key threshold” to watch in the coming quarters, especially if more price cuts are enacted.

“The big question will be margins, as the price cut will have an impact on that front, although we believe auto gross margins north of 20% remain the key threshold for the coming quarters,” he said. Ives said.

Bernstein analysts also suggested that further price cuts may be needed if Tesla is to meet its volume targets.

Investors will get more information on Tesla’s first-quarter results when it reports earnings and guidance after the market closes on April 19. And Tesla will have to wow investors if it wants to maintain its year-to-date gains of nearly 60%.