Tesla Inc. faced a significant setback in the first quarter of 2024 as its vehicle deliveries dropped by 8.5% compared to the same period last year, sending its shares tumbling down by 7% in premarket trading. The electric vehicle giant reported total deliveries of 386,810 vehicles, falling short of the anticipated 431,000 based on Wall Street consensus. This marked a stark contrast to the 422,875 vehicles delivered in Q1 2023 and a sharp decline from the 484,507 vehicles delivered in the last quarter of 2023.

The production figures also saw a downturn, with Tesla manufacturing a total of 433,371 vehicles in the first quarter, down from 494,989 vehicles in the previous quarter. The production breakdown revealed that 412,376 Model 3/Y cars were produced, with 369,783 delivered, alongside 20,995 other models produced and 17,027 delivered.

Tesla's delivery shortfall was below even the most pessimistic forecasts, with analysts initially predicting figures around 470,000, later revised down to a consensus of 431,000. The discrepancy between production and deliveries, approximately 50,000 vehicles, highlighted a demand problem within the company, contradicting the excuses provided for the lower production levels.

The electric carmaker attributed the decline in vehicle deliveries to several challenges, including disruptions caused by the Red Sea conflict that affected its component supply chain and led to temporary suspensions of production at its German factory outside Berlin. Environmental activists further compounded these issues by setting fire to infrastructure near the German factory, impacting Tesla's operations.

Competition in China also posed a significant hurdle for Tesla, with domestic EV makers like BYD and Xiaomi intensifying the market rivalry. This competition led Tesla to cut back on production at its Shanghai plant and reduce workers' schedules, indicating a slowdown in demand for its vehicles in the Chinese market.

The launch of Tesla's Cybertruck received mixed reviews in the U.S., and the company's discounts and incentives appeared less effective in boosting sales than in previous periods. In a last-ditch effort to drive sales, CEO Elon Musk mandated sales and service staff to install and demo the company's Full Self-Driving system to customers in North America before vehicle handovers, despite the system not rendering Tesla cars autonomous.

The first-quarter performance resulted in a 29% drop in Tesla shares, marking the biggest quarterly decline since the end of 2022 and one of the steepest since Tesla's IPO in 2010. This downturn signals a critical juncture for Tesla as it grapples with production challenges, increased competition, and a clear demand issue, underscoring the need for strategic adjustments to regain its momentum in the EV market.