Tesla Faces First Annual Drop In Deliveries

Tesla reported production and delivery numbers and missed analysts estimates of 504,770 units delivered versus 495,570 estimated for the fourth quarter of 2024.  This was the first ever drop in delivery numbers reported by the EV pioneer. While 9200 may not seem like a lot, the market perception of demand based on delivery numbers led to a 7% drop in stock price for the first day of trading in 2025. 

Model 3 and Y continue to make up the bulk of the deliveries at 95.2%. Cybertruck sales appear to be driving the overall growth of the other categories which include the slowing sales and aging line up of Model S and Model X.  Meanwhile, Tesla's main competitor, BYD, gained 12.1% in battery electric vehicles but still fell short of dethroning Tesla as the top battery electric producer for 2024 at 1.76 million units vs Tesla's 1.79 million units. The competition is gaining share with GM, Ford, Rivian, Hyundai, BMW, and VW competing hard in the US.  In China, Europe, and Asia, BYD is creating fierce competition with Tesla for sales.

Many believe the 63% gain in 2024 for the stock was driven by narrative not fundamentals with founder Elon Musk's close relationship to President Trump creating a halo effect. 

The Bottom Line: The Tesla Story Has Always Been Bigger Than EV's

While bears are happy to see less than 500k deliveries for Tesla, the numbers delivered were respectable given that overall demand for EVs are down.  With subsidies going away in most countries, the return of the hybrid will be dominating most sales for quite some time.  This macro pressure will require EV auto makers to drive down the cost of production and hope for better charging infrastructure investments.

In this new era of Exponential Efficiency, Tesla is rapidly working towards driving unit costs down with Optimus Robots and hyper automation.  In fact, the new Model Y Juniper has reportedly been set for a daily production capacity of 600 units at a much lower cost structure. Add Robotaxis to the mix for a low cost model and new business model, Tesla is on the cusp of changing the overall economics of transportation.

On the energy front, the Megapacks will be key to energy security around the world.  With China projected to produce energy at $0.01 per KwH in five years, the race for cheap energy in manufacturing and data centers that power AI is on.  Countries around the world will have to find ways to achieve low cost energy and Tesla has a competitive approach in both battery technology and storage.

But the bigger point is how Tesla is a deep tech company and the work being used to create highly efficient production via Optimus Robots should not be ignored.  Cars are the first use case for these Robots.  In fact, these robots will play a bigger role in ensuring low cost manufacturing amidst a long term global population decline.  Moreover, these robots will be important in other industries going forward including dual use technologies for the modern battlefield.

Few companies in the world and few founders can take humanity from concept to commercialization on critical deep tech.  For those naysayers on Tesla, the valuations as a car company will never make sense.  For those who believe that the future of deep tech will sit with a few players such as Tesla, these valuations still seem reasonable.

Your POV

Will Tesla's EV business be around in 10 years or will we be looking at Tesla as a deep tech manufacturer for AI and Automation?

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