Tesla’s Sales Plunge, Casting Doubt on 2025 Growth Target

Tesla reported its worst quarterly sales performance since 2Q22, delivering 336,681 vehicles between January and March 2025. This marks a 13% decline from 1Q24 when the company sold 386,181 units. The results fell significantly short of Wall Street expectations, which had projected approximately 390,000 deliveries.

The weak sales figures come at a critical time for Tesla, as the company had forecasted a "return to growth" in 2025 after narrowly missing its 2024 sales goal and recording its first annual decline. Analysts at Deutsche Bank had already revised their estimates downward, predicting 345,000 deliveries and cutting Tesla’s full-year forecast from 2.1 million to 1.7 million vehicles.

Tesla attributed the sales decline partly to manufacturing transition for the Model Y, its best-selling vehicle. The company halted production at all four global factories to retool assembly lines for a refreshed version of the Model Y, known as the "Juniper." 

During the quarter, Tesla produced 345,454 Model 3 and Model Y units during the quarter but delivered only 323,800. Additionally, it manufactured 17,161 units of the Model S, Model X, and Cybertruck but delivered just 12,881.

"While the changeover of Model Y lines across all four of our factories led to the loss of several weeks of production in Q1, the ramp of the New Model Y continues to go well," Tesla stated.

In China, where Tesla faces growing competition from domestic automakers, deliveries from its Shanghai factory fell for the sixth consecutive month. In March, the company shipped 78,828 vehicles, an 11% decline year-over-year.

Beyond production challenges, Tesla has faced political backlash tied to CEO Elon Musk’s involvement in US and international politics. Musk was recently appointed by President Donald Trump to lead the Department of Government Efficiency (DOGE), a role focused on reducing federal spending. His political alignment and comments have sparked protests across the United States, Canada, and Europe, some of which have involved vandalism at Tesla facilities.

"We are not going to look at these numbers with rose-colored glasses… they were a disaster on every metric. The more political Musk gets with DOGE, the more the brand suffers. There is no debate," said Dan Ives, analyst, Wedbush Securities. 

Despite the controversy, Tesla has received strong support from conservative figures, including President Trump, who recently purchased a Model S and pledged to classify vandalism against Tesla properties as domestic terrorism. Some investors speculate that this political backing could broaden Tesla's appeal among conservative consumers, a demographic historically skeptical of electric vehicles.

Tesla shares initially dropped nearly 6% in pre-market trading following the earnings report before recovering slightly to a 2% decline by market close. Year-to-date, Tesla stock is down approximately 31%.

The company is also grappling with new US tariffs on vehicles and components. CFO Vaibhav Taneja previously acknowledged that these tariffs would negatively impact profitability, with Musk himself stating the effect "will not be trivial."

In a letter to the US Trade Representative, Tesla highlighted that while it is aggressively localizing its supply chain, some components remain difficult or impossible to source domestically. Currently, 60% to 75% of Tesla’s EV parts are manufactured in the United States, depending on the model.

"The winner in our view from this tariff is no one… as even Tesla is clearly hit from these tariffs and will be forced to raise prices," Ives noted.