Tesla deliveries mark weakest quarter in a year, inventory swells

By Akash Sriram

April 2 (Reuters) – Tesla kicked off 2026 with its weakest quarterly deliveries in a year, missing Wall Street expectations as fading U.S. incentives and intensifying global competition strain its core electric vehicle business.

Shares of the Elon Musk-led company fell more than 4%, after losing about 15% so far this year.

The figures also pointed to a growing imbalance between output and demand. Tesla produced 50,363 more vehicles than it delivered during the quarter, the widest gap in at least four years, signaling a build-up in unsold inventory.

“I believe the inventory build is due to both the new normal of the EV (tax credit) expiration and growing threat of competition as well as the need for lower interest rates to drive consumer demand,” said Camelthorn Investments adviser Shawn Campbell, who owns Tesla shares.

Rising U.S. gasoline prices triggered by the Iran war could support electric vehicle demand, analysts have said.

“The one positive is that high gas prices will probably have more people consider EVs, but that would take time to see in the numbers and would require a sustained period of higher gas prices,” Campbell said.

The world’s most valuable automaker is navigating intensifying competition, having lost its EV sales crown last year to China’s BYD amid pressure from legacy and lower-cost Chinese rivals.

Still, Tesla’s China-made electric vehicle sales rose for a second consecutive quarter. For the January-March period, sales increased 23.5% from a year earlier.

The expiry of a $7,500 federal tax credit in the U.S. at the end of September dealt a blow to U.S. electric vehicle demand, stripping away a key incentive for the purchase of an EV.

Approval of Tesla’s Full Self-Driving system in Europe has also been delayed, with a Dutch decision expected this month that could unlock wider rollout and support demand.

“Tesla’s first-quarter deliveries reflect the U.S. tax credit expiration as well as FSD not yet being approved in the EU. These factors will likely continue to weigh on deliveries until Tesla gets EU approval and until we enter the fourth quarter in the U.S.,” said Seth Goldstein, analyst at Morningstar.

Tesla delivered 358,023 vehicles in the first quarter, missing analysts’ estimates of 368,903, according to Visible Alpha data. Deliveries were up 6.3% from a year earlier, when protests against Musk’s far-right politics had weighed on demand.

Smaller rival Rivian Automotive delivered more vehicles than analysts expected in the first quarter.

While Europe weighed on Tesla’s global figures last year, the company has since showed signs of stabilization, growing its foothold in key markets such as France in the first quarter of 2026.

Tesla has recorded two straight years of delivery declines, with some analysts now warning of a third.

INVESTORS LOOK BEYOND DELIVERIES

Wall Street has increasingly looked past the quarterly delivery count, analysts have said, as Musk steers the company toward solar energy, humanoid robotics and autonomous taxis.

“As ever with Tesla, a few thousand cars either way is unlikely to move the dial on valuation. The bulk of the investment case rests on what is coming next rather than where the core auto business sits today,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown, who holds Tesla shares.

Tesla’s valuation of about $1.4 trillion rests heavily on its future ambitions, even as auto sales still remains the backbone of its revenue.

Tesla launched a limited robotaxi service in Austin last June and plans a rapid expansion in 2026, though its footprint remains small compared with Waymo as Cybercab production ramps up.

The company said its energy storage division, which has become an increasingly important part of its business, deployed 8.8 gigawatt-hours of energy storage products in the first quarter, down 15.4% from a year earlier.

Meanwhile, Musk’s SpaceX has confidentially filed to go public in the United States, targeting a valuation of $1.75 trillion, higher than the automaker.

(Reporting by Akash Sriram in Bengaluru; Editing by Devika Syamnath)