Tesla Skids 15% After Deliveries Shortfall

Tesla (TSLA) started 2023 the way it ended 2022: depressing the stock market. Its once high-flying shares dropped 15% on Tuesday after the maker of electric vehicles missed estimates for quarterly deliveries.

Tesla delivered 405,278 cars in the fourth quarter, a record for the company but short of Wall Street analysts' expectations of more than 420,000.

Tesla underperformed each of the other 499 stocks in the S&P 500 index last year with a 65% plunge that cost shareholders more than $700 billion in capital losses and stripped CEO Elon Musk of bragging rights as the richest human. The stock lost 60% between Sept. 20 and the end of the year.

The automaker cited "significant COVID and supply chain related challenges throughout the year." It also said it had more cars in transit at the end of the quarter as a result of a "transition to a more even regional mix" in production.

Wall Street blamed slowing consumer demand for Tesla's autos. Deliveries missed estimates for the third straight quarter even though the consensus target had declined in recent weeks. "Tesla sells cars, and the auto industry is slowing down,” Loup Ventures Managing Partner Gene Munster told Bloomberg.

"Tesla is facing a significant demand problem," Bernstein analyst Toni Sacconaghi Jr. wrote in a research note. Goldman Sachs lowered its share price target for Tesla to $205 from $235, while maintaining a buy rating.

Even offering a $7,500 discount—a rarity for Tesla—to buyers willing to take delivery of its vehicles before the end of December couldn't help the carmaker overcome waning demand. In addition to the rising interest rates already flagged by Musk as a business threat, Tesla will be dealing with the likelihood that most of its vehicles won't qualify for Inflation Reduction Act tax credits, based on a list unveiled by the Internal Revenue Service last week.

Tesla models are too expensive to qualify for the incentive based on the $55,000 qualifying price limit for sedans, and most aren't heavy enough to be treated as SUVs, which have a qualifying price limit of $80,000.

"This is messed up," Musk tweeted in response to a post by a former Tesla executive arguing that "Tesla is getting screwed hard" by the tax credit provisions. On the third-quarter earnings conference call, Musk assured analysts and investors Tesla's models would qualify for the tax credits.

The loss of the incentives could further erode U.S. demand amid rising competition in EVs from traditional automakers. "There is risk to both pricing and volume” for Tesla, SPEAR Invest Chief Investment Officer Ivana Delevska told Bloomberg. “Analysts are estimating 50% volume growth, which is a stretch in an environment where affordability is the focus point for the consumer.”

Musk has continued to opine primarily on politics and Twitter policies from his Twitter account during Tesla's recent skid.

Some Tesla shareholders have blamed Musk's $44 billion acquisition of Twitter and its subsequent controversies for distracting him from his duties as CEO of the automaker. Musk also sold $23 billion of Tesla's stock in 2022, including $3.6 billion in December and nearly $4 billion in November with the price in a tailspin. He recently said he's "definitely" not selling more Tesla stock in 2023.

Another concern for Tesla bulls is that Musk's political sympathies toward the right might be alienating many Tesla buyers. On Monday, Musk seconded a claim by former President Donald Trump that Trump wasn't at fault for the Republicans' performance in the midterm election, and volunteered he was "looking into" a claim by right-wing commentator Jack Posobiec that Posobiec's tweets were not appearing in his followers' Twitter timelines.