The company's sales are expected to exceed the 2023 target of 1.8 million cars
Elon Musk's company seeks to attract customers who focus primarily on price and ease of use
Obstacles of inflation, interest rates, safety and competition stand in the way of achieving this goal
Tesla is expected to announce on Tuesday that it has achieved a new record annual deliveries of electric cars in 2023, primarily due to those who are fascinated by Elon Musk and are quick to acquire the latest technological developments. Now the company is expanding its appeal.
The Austin-based electric vehicle maker is estimated to have delivered about 483,200 vehicles in the fourth quarter, according to analysts surveyed by Bloomberg. This means that Tesla may have exceeded its goal of delivering 1.8 million vehicles in 2023, an all-time high for the company, but only a fraction of what Toyota Motor or General Motors typically sells.
In the next phase of growth, Tesla must attract traditional buyers, who choose vehicles primarily based on price and ease of use. “Looking at overall car buying, we're trying to reach the next group of electric vehicle users,” Vaibhav Taneja, the company's chief financial officer, said during a call with investors in October.
The Musk-led company faces a number of obstacles to reaching this audience: Inflation and high interest rates have made consumers more cautious about expensive purchases. In addition, many buyers still wonder about safety and whether there are enough charging stations.
BYD overtakes Tesla as the most popular electric car in the world
There is also the factor of competition, as those who decide to switch from gasoline-powered cars also have a growing range of electric cars to choose from, in addition to Tesla.
In another challenge, on January 1, some Tesla models are expected to lose the entire $7,500 federal tax credit on electric vehicles due to strict rules on sourcing battery components from China. The company's website says that some versions of the Model 3 will be affected.
Endeavors to attract
Tesla has taken some steps to break into the market in 2023. It has reduced prices across its lineup of cars, forcing it to sacrifice profit margins for sales volumes. The price cuts were particularly evident in China, the market where Musk said competition was the toughest.
However, Tesla is likely to be overtaken by China's BYD, with its much newer lineup. Musk said in October that Tesla's latest vehicle, the futuristic-looking Cybertruck, has not yet reached mass production and is at least a year away from achieving profitability. Analysts estimate that the company delivered between 200 and 5,000 Cybertruck trucks this quarter.
Why is Musk narrowing Tesla's profit margins by reducing prices?
Tesla has not yet disclosed the number of vehicles it expects to deliver in 2024. The two models that represent about 97% of the company’s deliveries this year are the Model 3 sedan that the company introduced in 2017, and the Model Y, a sport utility vehicle that it introduced. In 2020.
“We struggle to understand how fundamental demand can meaningfully improve with an aging product portfolio, and not a gradual decline,” Tony Sacconaghi, the Bernstein analyst who issued a parallel recommendation to sell Tesla shares, wrote in a research note to clients this week. "In prices, amid increasing competition in the field of electric cars. Equally important, we do not expect the situation to improve in 2025."
Advertising campaign
Tesla has a few methods it can use to boost sales in the future. The Model 3 sedan was revamped this year, giving it a more elegant appearance and a longer range. The car was shown for the first time in China before being sold in Europe, and the new “Model 3” is expected to arrive in the United States in 2024, although Tesla has not confirmed the timing. In addition, it is rumored that the company is planning to launch a new version of the “Model Y” from its factory in Shanghai.
Tesla is also working to strengthen its marketing efforts. It has built a massive brand without having to pay for traditional advertising, but it has recently begun experimenting with Google Ads. One of these ads currently promotes the possibility of renting a Model Y for $399 a month.
Tesla launches its Cybertruck for $61,000 in 2025
Uraka Kuni, managing director of Jennison Associates, which owns a stake in Tesla, said he believes the company is making a lot of efforts to reach the next wave of potential customers.
Cybertruck attracts interested buyers to Tesla showrooms. In addition, he said that Tesla executives besides Musk, such as design chief Franz von Holzhausen and Lars Moravy, vice president of vehicle engineering, are speaking more on behalf of the company to market its products.
“If you look at global electric vehicle sales, you will find that BYD and Tesla are still the main players driving sales,” Cooney said. “Going forward, Tesla will remain in a good position.”