Tesla Q2 sales dip amid supply chain issues, lockdown in China

Electric car maker Tesla had a difficult quarter from April to June, as its sales fell to their lowest quarterly level as supply chain issues and pandemic restrictions in China slashed production of its electric vehicles (EVs).

The company on July 2 said that it had sold 2,54,000 cars and sport utility vehicle or SUVs from April through June, an 18% drop from the first three months of this year and also well below the pace in last year’s final quarter. The last time Tesla sold fewer vehicles globally was in Q3 2021 when it delivered 241,000.

Last week itself, the auto industry reported a 21% drop in sales during the second quarter as the average price for vehicles went up to a whopping $45,844, amid soaring inflation, according to a study by auto research firm, JD Power.

Tesla’s sales drop may be a harbinger of weaker second-quarter earnings for the Austin, Texas-based company, which is the world’s top-seller of battery-powered vehicles and has posted net profits for nearly three years. 

Tesla CEO Elon Musk also has made a $44 billion bid for Twitter, which he placed on hold after complaining of its too many spam bot users who aren’t humans. Much of the erosion in Tesla’s value has occurred since Musk became Twitter’s largest shareholder and then launched a takeover bid that has raised concerns, he has too much on his already crowded plate, believe experts.

Musk in his Twitter account too mentioned that the pandemic restrictions that forced the Shanghai factory to remain temporarily closed during the quarter.

Wedbush analyst Dan Ives estimates that more than 40% of Tesla’s sales come from China. Moreover, the Shanghai factory produced about 70,000 fewer vehicles due to the shutdowns.

Tesla’s latest delivery numbers came out a week after the release of an interview with Musk in which he dubbed new factories in Austin and Berlin as “money furnaces” that were losing billions of dollars because supply chain breakdowns were limiting the number of cars they can produce.

In a June 30 interview with the officially-recognised club, Tesla Owners of Silicon Valley, Musk said that the new factories in Austin, Texas, and Berlin, Germany, were costing the company "billions of dollars". The factory in Austin opened on April 7, 2022, and the factory in Berlin opened on March 22, 2022. But added that “it’s all gonna get fixed real fast.” He also has discussed making “salaried workers return to offices and a possible 10% cut in Tesla’s workforce due to a possible recession”.

Since the onset of Covid-19 automakers, who procure parts from all corners of the globe, were facing challenges with supply chain breakdowns. The shortage of automotive-grade chips needed to run cars, plummeted the prices for used and new cars. Moreover, automakers had to shut factories for several weeks to as precautionary measure to coronavirus. At the same time, demand for laptops, tablets and mobile phones soared as people stuck at home with their devices.

Despite the odd, Musk signalled things are getting better, as his company produced more vehicles during June than in any other month so far. Tesla plans to release its full results for the April-June period on July 20.