Photo: Lucid | Edited
Tesla ended its best quarter yet on March 31, but one thing sticks out like a sore thumb from the carmaker’s sales and delivery report. Tesla failed to find customers for almost half of the Model S and Model X production, which is worrying. Not necessarily for Tesla but more so for other EV startups already struggling to stay afloat.
Although not everyone fully agrees, Tesla’s Q1 2023 production and delivery figures are impressive, easily the best quarter for the American EV maker. Since the first quarter is usually the slowest for car sales, the numbers look even more impressive. Tesla produced 441K vehicles and delivered 423K in the first three months of the year. The difference between them is more worrying, despite the good results. It can be partly attributed to the cars in transit to various markets, although things are looking worse for Model S and Model X.
Unfortunately, Tesla doesn’t break down the numbers by model, but its high-end platform looks in trouble. Of the 19,437 Model S and Model X produced, only 10,695 have been delivered. This might indicate a demand problem for the luxury models in Tesla’s lineup. Model S and Model X demand was weak in Q3 2022, but the trend accelerated in 2023, despite the massive price cuts Tesla operated in January. A Tesla Model S ordered now has an April delivery window, confirming the demand problem Tesla is facing.
There could be several reasons for this sluggish demand. One is the lack of appetite for $100K cars in a harsh economic environment. With interest rates through the roof and jobs being cut left and right in the corporate world, people are less likely to commit to a costly purchase. Another problem could be Tesla’s disappointing build quality at this price point. Many complained that fit and finish, and sometimes even the Model S and Model X features, are behind many rivals in the luxury segment. Tesla certainly needs to do more to energize sales without cutting prices.
Past actions indicate that the EV maker would rather do that than improve quality. It’s almost guaranteed that this would also happen with the Model S and Model X unless Tesla sees increased demand in the second quarter. The refreshed models featuring the Hardware 4 computer have just started deliveries, and the situation might improve in the coming months. But if it doesn’t, we’re in for more price cuts. Especially as the Model S is double the price of the Model 3 without being double the car.
Even at a discount, the Model S and Model X are still more expensive than before the pandemic. Tesla could cut a lot more off the sticker price and still make a fat profit on them, and we will probably see that happen. This is not as troubling for Tesla as it is for other EV startups with products in the $90K-$120K price segment. We expect Lucid executives to stay awake at night trying to figure out how they would cope with another price reduction. They surely cannot afford to follow Tesla, as they are already in a dire situation.
Rivian is somehow in a better position, but not for long. Tesla would undoubtedly learn a lesson from this, so expect the Cybertruck to squeeze hard the R1T in the electric pickup truck segment. Many expect the electric pickup to have a Model S/X price, but we think it would be more affordable. Thanks to Tesla’s optimized production and economy of scale, it could retail for as low as $70,000, if not lower. That could wipe out the rivals, as raising new capital is almost impossible in current economic conditions.
Unfortunately, Tesla doesn’t break down the numbers by model, but its high-end platform looks in trouble. Of the 19,437 Model S and Model X produced, only 10,695 have been delivered. This might indicate a demand problem for the luxury models in Tesla’s lineup. Model S and Model X demand was weak in Q3 2022, but the trend accelerated in 2023, despite the massive price cuts Tesla operated in January. A Tesla Model S ordered now has an April delivery window, confirming the demand problem Tesla is facing.
There could be several reasons for this sluggish demand. One is the lack of appetite for $100K cars in a harsh economic environment. With interest rates through the roof and jobs being cut left and right in the corporate world, people are less likely to commit to a costly purchase. Another problem could be Tesla’s disappointing build quality at this price point. Many complained that fit and finish, and sometimes even the Model S and Model X features, are behind many rivals in the luxury segment. Tesla certainly needs to do more to energize sales without cutting prices.
Past actions indicate that the EV maker would rather do that than improve quality. It’s almost guaranteed that this would also happen with the Model S and Model X unless Tesla sees increased demand in the second quarter. The refreshed models featuring the Hardware 4 computer have just started deliveries, and the situation might improve in the coming months. But if it doesn’t, we’re in for more price cuts. Especially as the Model S is double the price of the Model 3 without being double the car.
Even at a discount, the Model S and Model X are still more expensive than before the pandemic. Tesla could cut a lot more off the sticker price and still make a fat profit on them, and we will probably see that happen. This is not as troubling for Tesla as it is for other EV startups with products in the $90K-$120K price segment. We expect Lucid executives to stay awake at night trying to figure out how they would cope with another price reduction. They surely cannot afford to follow Tesla, as they are already in a dire situation.
Rivian is somehow in a better position, but not for long. Tesla would undoubtedly learn a lesson from this, so expect the Cybertruck to squeeze hard the R1T in the electric pickup truck segment. Many expect the electric pickup to have a Model S/X price, but we think it would be more affordable. Thanks to Tesla’s optimized production and economy of scale, it could retail for as low as $70,000, if not lower. That could wipe out the rivals, as raising new capital is almost impossible in current economic conditions.
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