Tesla's first-quarter results may appear to show a rebound on the surface, but analysts say signs of weakening demand are becoming increasingly clear. Despite higher deliveries, production far outpaced sales, causing inventory to pile up rapidly.
Tesla said in a report released Wednesday that first-quarter vehicle deliveries totaled 358,023 units, up approximately 6% from 336,681 units in the same period a year earlier. However, deliveries fell 14% from the previous quarter and missed the market consensus estimate of approximately 368,903 units.
Markets are focusing more on the gap between production and sales than on delivery figures alone. Production in the same period reached 408,386 units — roughly 50,000 more than deliveries. This represents the largest supply surplus in recent years, indicating that unsold vehicles are accumulating as inventory.
The auto industry interprets rising inventory as a precursor to margin deterioration. When inventory grows, price cuts and expanded promotions typically become unavoidable, which in turn is likely to lead to lower margins. Tesla has already relied on price reductions to sustain demand, but analysts say room for further cuts is limited.
Policy and financial environment shifts underpin the demand slowdown. In the United States, the federal EV tax credit worth up to $7,500 (approximately 11.3 million won) expired in September last year, increasing the burden on consumers. Combined with persistently high interest rates, more buyers are believed to have postponed vehicle purchases.
The competitive landscape is also deteriorating rapidly. Chinese manufacturers led by BYD are expanding global market share with low-cost models, intensifying price competition. Tesla ceded its position as the world's top EV seller last year, drawing assessments that its market dominance has weakened.
Still, some external factors have had a partially positive effect on EV demand. Rising international oil prices driven by heightened tensions in the Middle East since late February have prompted consumers to consider EVs as a way to reduce fuel costs, analysts say. Search volumes for EVs and hybrid vehicles increased on automotive platforms CarGurus and Edmunds.
Some legacy automakers also saw a partial rebound in EV sales. Hyundai Motor (005380.KS) said U.S. sales of its Ioniq 5 electric vehicle posted double-digit growth in March, while Kia (000270.KS) reported a 30% increase in first-quarter EV sales. General Motors' Cadillac division also recorded higher EV sales.
However, industry observers say it takes time for the high oil price effect to translate into actual purchases. Because consumer patterns typically take several months to shift, it is difficult to conclude that demand is recovering in the short term. The possibility that demand for hybrid vehicles — which combine EVs and internal combustion engines — may also rise during this period has been raised.
Given these trends, markets are assessing that the EV industry has passed its high-growth phase and entered a slowdown. Unlike the period of rapid sales increases in the past, growth is more likely to follow a moderate trajectory going forward.
Investor focus is also shifting. Expectations for future businesses such as autonomous driving and artificial intelligence are increasingly reflected in corporate valuations more than vehicle sales, analysts say. However, since the auto business remains the core of Tesla's revenue, prolonged sales slowdowns and inventory buildup could weigh on overall corporate earnings, observers note.