Tesla Deliveries Rose 83% in the Latest Quarter

Tesla’s global deliveries surged 83% in the second quarter, helped by sharp price cuts and hefty discounts as the electric-car maker chases growth in an increasingly competitive marketplace.

The car company led by billionaire Elon Musk said Sunday that it delivered more than 466,000 vehicles to customers worldwide in the April-to-June period, a record quarter for sales.

The better-than-expected results give Musk new ammunition in his argument that demand remains strong for his aging lineup as he gambles that pursuing growth at the expense of profitability will have long-term benefits for the electric-car maker. 

Investor confidence was shaken earlier this year after Tesla reported first-quarter results that some suggested showed softening interest in the company’s bestsellers, the Model 3 sedan and Model Y sport-utility vehicle, and Musk’s comments that he would be willing to sacrifice some profitability for continued growth. 

How much the effort to boost sales this year has affected profits will be evident on July 19, when the electric-car maker reports financial results. In the first quarter, Tesla’s operating margin, a measure of profitability, fell to 11.4%, from 19.2% in the first three months of 2022. Still, it remains higher than that of many carmakers. 

Sunday’s results mean Tesla’s rate of growth can slow in the second half to 24% compared to the same period a year ago and still meet Wall Street expectations for 1.82 million deliveries this year. Some investors are hopeful that Tesla’s price cuts hit a bottom in the second quarter.

Tesla has been targeting 50% annual delivery growth on average, though it has set a more modest goal for this year. The car company has been adding factory production at the same time that underlying demand for its vehicles has been showing some signs of softening after years of blistering sales increases.

Deliveries in the first quarter rose 36% from a year earlier, lifted in part by a series of price reductions that also dented earnings in the same period. Last year, an extended shutdown at Tesla’s Shanghai assembly plant weighed on the company’s second-quarter performance. 

The world’s top seller of electric vehicles, Tesla has regained momentum this year after a punishing 2022, in which the stock had its worst annual performance and the company fell short of its target for deliveries.

Tesla’s shares have more than doubled in the first six months of this year, ending June at $261.77, as the company has remained upbeat about its growth prospects and recruited several car-company rivals to use its fast-charging network.

But the stock remains below a peak of more than $400 a share in November 2021, and Tesla is under pressure to prove to Wall Street that it can keep winning over buyers as competitors accelerate the rollout of their own electric-vehicle offerings.

Other car companies are expected to release their second-quarter sales on Wednesday. 

Musk, Tesla’s chief executive, unnerved some investors this spring with his declaration that the company was prepared to sacrifice near-term profitability in pursuit of growth, a strategy that rival automakers have largely abandoned over the years.

“We’ve taken a view that pushing for higher volumes and a larger fleet is the right choice here, versus a lower volume and higher margin,” Musk said in April.

“This is a good time to increase our lead further,” he added.

Over the past year, Tesla has gone from having monthslong waiting lists for many of its models to accumulating inventory.

To juice demand, Tesla has employed a range of promotional tactics, from outright price cuts that are unusual in the car business to more conventional techniques such as discounts and freebies.

Since early January, starting prices across the company’s lineup have dropped between 14% and 28% in the U.S., depending on the model, according to The Wall Street Journal’s review of the changes on Tesla’s website.

The reductions have stoked sales, pressured rivals and divided customers, some of whom have been caught on the wrong side of the price changes.

Tesla aims to boost sales from the 1.3 million vehicles delivered last year. It produced more than 920,000 cars and sport-utility vehicles in the first six months of the year and has set a goal of producing 1.8 million vehicles in 2023.

To achieve its targets, it has been adding factories around the world. It officially opened one in Texas last year and another in Germany to help it churn out more cars. With the added output, it needs to keep sales rising to avoid an inventory buildup.

Adding to the pressure is that Tesla, unlike traditional automakers, doesn’t have a dealership network to help it sell down excess stock if it starts to pile up.

Because of its direct-sales model, the car company holds the inventory on its books until it can make a sale and has to do the work of storing the vehicles and finding buyers, a task that becomes more onerous if supplies build. 

In the first quarter, the value of Tesla’s finished goods—a measure that reflects unsold vehicle inventory and those in transit to customers, among other products available for sale—increased to roughly $4.6 billion, up from less than $1 billion the year before, securities filings show.

While Tesla has often tinkered with prices—adjusting them up and down in a way that is similar to the dynamic pricing models of airlines and hotels—the revisions this year have resulted in substantial price cuts.

For example, in the U.S., Tesla has adjusted the price of one version of its Model Y SUV at least seven times in the past six months. Together, those changes have resulted in a sizable downward revision: The long-range Model Y now starts at $50,490, compared with $65,990 in early January. 

As of late June, Tesla also was offering thousands of dollars off certain vehicles it had in stock, and some buyers qualified for a $7,500 federal tax credit on top of that. 

Tesla’s discounts have stood out during a time that car companies are mostly holding the line on such promotions. The industry on average spent about $1,900 a vehicle on sales incentives in May, according to automotive-services firm Cox Automotive.

Some buyers have been frustrated by Tesla’s recent price cuts, which are more visible than the discounts and sales promotions other car companies heap on. 

Paul Gassman paid $60,240 for his Model Y in December, after a $3,750 discount and before taxes and fees. Six months later, that same vehicle would have cost $51,490.

“That is the cost of transparency: You know whether you got a good deal or not,” said Gassman, who owns an enterprise-software company and lives outside Jacksonville, Fla. Still, he said, “I think I’d prefer that than being in the dark and feeling good because I really don’t know what the going rate is.” 

—Tim Higgins contributed to this article.

Write to Rebecca Elliott at [email protected]