Tesla sales slow as pandemic Hobbles production

Tesla said on Saturday that vehicle deliveries between April and June fell 18 percent from the first quarter of the year, a rare slowdown for the company, which has been driven by production problems in China.

Tesla sells more electric cars than any other company and, until recently, has been expanding rapidly in China, Europe and the United States as rising gasoline prices have increased the appeal of battery power. Other automakers envied Tesla’s growth rate.

Tesla delivered more than 254,000 vehicles in the quarter, compared with 310,000 in the first quarter. It was the first quarterly drop in deliveries since the start of 2020, when the onset of the pandemic reduced car sales around the world.

Tesla’s sales would likely have been even higher if not for shutdowns and supply chain issues related to the pandemic that have disrupted operations at the company’s factory in Shanghai. China has the world’s largest car market and accounts for about 40 percent of Tesla’s sales.

Manufacturing in China “was an absolute disaster in April and May,” Wedbush Securities analysts Daniel Ives and John Katsinris told investors last week.

Tesla suggests it has overcome production problems, saying it built more cars in June than ever in its history.

Tesla has more orders than it can fill, but demand could slow if the global economy accelerates. Elon Musk, Tesla’s CEO, warned in an interview with Bloomberg News in June that a recession is “inevitable at some point” and that “it’s more likely to come soon.” He told employees that the company would cut 10 percent of its paid workforce.

Tesla appears unlikely to match its growth from last year, when deliveries rose 90 percent to 940,000 vehicles. A 50 percent increase by 2022 is more realistic, according to Wedbush analysts.

This, they said in a note on Saturday, was still an “impressive achievement” given that China had been “essentially shut down for two months”.

The slow growth rate is one factor that has caused investors to reconsider Tesla’s chances of dominating the car business. Tesla shares are down more than 40 percent from their November peak, even as more buyers are opting for electric cars because of their superior energy efficiency.

Depending on local utility rates, an electric vehicle costs significantly less to operate than a fossil fuel vehicle. The Tesla Model 3’s standard range gets the equivalent of 142 miles to the gallon and costs $450 a year to fuel, according to the Environmental Protection Agency. By comparison, a gasoline-powered Honda Accord gets 33 miles to the gallon and costs $2,200 a year to fuel.

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