Tesla’s Q1 2024 deliveries plummeted by 8.5% year-over-year to 386,810 vehicles, falling short of Wall Street predictions and marking its first sales decline in four years. Furthermore, Tesla’s inventory is swelling, with production exceeding deliveries by 12%, prompting the company to offer substantial price cuts on existing stock, potentially impacting margins. In Q4 2023, the average vehicle price dropped to $44,500, and gross margins declined to 17.6%. Consequently, TSLA stock has experienced a 7% decline in just one week and is down 33% year-to-date.

Although Tesla’s stock performance has been volatile, with a 30% decline since early 2021 and a remarkable 102% surge in 2023, it underperformed the S&P 500 in 2022. Competing with the S&P consistently has proven challenging for individual stocks, including other industry giants like AMZN and TM. To combat this drop in value, Tesla is reportedly already reacting to the decline by cutting more than 10% of its global workforce.

While the performance of Tesla has often been a bellwether for the electric car market in general, in this instance, it may not be the case. The electric car market has continued to grow year on year, this disconnect from Tesla’s fortune is more of an indicator of the increasing diversity of the EV market as more players enter the market. Another issue may be the increase in the cost of living globally, interest rates are increasing, making finance options less desirable and Tesla is facing stiff competition in markets such as China, where cheaper options are available. It is unlikely that this is more than a hiccup for Tesla, and a reflection of just how dominant Tesla was in the EV market rather than a general downturn for EVs.

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