Tesla deliveries disappoint again as demand slows and unsold cars pile up

Tesla began 2026 on a weak footing, reporting first-quarter global deliveries of 358,023 vehicles — falling short of analyst expectations of roughly 372,000 and marking its second consecutive quarterly miss, as headwinds mount for the electric vehicle (EV) sector.

The delivery figure represents a 6.3 per cent increase year-on-year. However, the comparison is seen as less reassuring by analysts because the year-ago period was unusually weak, impacted by a global production pause of the Model Y and consumer backlash linked to chief executive Elon Musk’s political positioning.

The latest numbers underscore growing concerns over demand for Tesla’s core EV business, even as the company continues to command a premium valuation driven by its future bets on autonomous driving, robotics and energy storage.

Inventory builds as production outpaces demand

Tesla’s operational data pointed to a widening gap between production and deliveries. The company produced 50,363 more vehicles than it delivered during the January–March quarter — the largest such imbalance in at least four years — signalling a build-up in unsold inventory.

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Shares of Tesla fell more than 4 per cent following the announcement, extending losses to about 15 per cent so far this year, reflecting investor unease over slowing sales momentum.

Analysts said the inventory build reflects a combination of fading government incentives, higher borrowing costs, and intensifying competition — factors that are reshaping the EV demand landscape globally.

US demand hit by subsidy withdrawal

The United States, Tesla’s largest market, is adjusting to the withdrawal of federal EV purchase subsidies under the administration of Donald Trump. The expiry of a $7,500 tax credit has removed a key demand driver that supported EV adoption for years.

Market watchers say the absence of incentives is already weighing on consumer demand, particularly in a high-interest-rate environment where financing costs remain elevated.

China competition intensifies, incentives return

In China, Tesla faces stiff competition from domestic players, including BYD, which overtook it last year as the world’s top EV seller. Local automakers have benefited from renewed government and private-sector incentives, intensifying pressure on Tesla’s pricing and margins.

In response, Tesla has rolled out a seven-year low-interest financing offer in China — its first such move in the market — aimed at boosting demand amid the increasingly competitive landscape.

Despite these challenges, Tesla’s China-made EV sales rose for a second consecutive quarter, increasing 23.5 per cent year-on-year in the January–March period.

Europe stabilises, but regulatory hurdles persist

Tesla’s performance in Europe, which dragged global numbers last year, showed signs of stabilisation in early 2026, with gains in key markets such as France.

However, delays in regulatory approval for Tesla’s Full Self-Driving (FSD) technology in the European Union continue to weigh on growth prospects. A decision from Dutch authorities later this month could unlock broader deployment and support demand recovery in the region.

Energy business weakens, focus shifts to future bets

Tesla’s energy storage division — increasingly seen as a key growth pillar — deployed 8.8 gigawatt-hours in the first quarter, down 15.4 per cent from a year earlier, adding to concerns about near-term performance across business segments.

Even so, analysts suggest that investors are gradually shifting focus beyond quarterly delivery numbers. Much of Tesla’s valuation — estimated at about $1.4 trillion — hinges on its long-term ambitions in autonomous driving, robotaxis, artificial intelligence and humanoid robotics.

The company has already launched a limited robotaxi service in Austin and plans a broader rollout in 2026, though it still trails competitors in scale.

Oil prices may offer delayed tailwind

One potential upside for Tesla could come from rising fuel prices linked to geopolitical tensions in West Asia, including disruptions around the Strait of Hormuz. Higher petrol prices may eventually push more consumers toward EVs, analysts said.

However, they cautioned that such a shift would take time to reflect in sales data and would depend on sustained fuel price increases, as well as broader macroeconomic stability.