Tesla, formerly recognized for its robust demand and extensive waiting queues, confronts a fresh obstacle: an abundance of unsold vehicles. This signifies a notable departure from the era when each Tesla swiftly found a buyer upon rolling off the assembly line. Presently, the company wrestles with overseeing substantial inventories, resulting in significant price reductions on favored models such as the Model Y in efforts to entice purchasers.
In the first quarter of 2024, Tesla produced 433,371 vehicles but sold only 386,810, leaving 46,561 cars unsold. This surplus can be attributed to a general slowdown in EV sales and internal mismatches between production and demand.
Tesla’s Chief Financial Officer, Vaibhav Taneja, highlighted this mismatch as a key reason for the company’s negative $2.5 billion free cash flow, also impacted by spending on AI computers. Taneja expects this inventory buildup to reverse in the second quarter, with positive free cash flow returning.
“The primary driver of this was an increase in inventory from a mismatch between builds,” Vaibhav Taneja said of the company’s -$2.5 billion in free cash flow (spending on AI computers was also to blame). “We expect the inventory built to reverse in the second quarter and free cash flow to return to positive again.”
Satellite imagery from SkyFi illustrates the extent of Tesla’s inventory issues. Lots surrounding Tesla’s Texas Gigafactory, once partially full, are now completely packed. Similar scenes are observed nationwide, with places like St. Louis’ Chesterfield Mall and Moreno Valley, California, repurposed to store the surplus cars. Hundreds of Model Ys can be seen parked in these locations.
Despite selling hundreds of thousands of cars, Tesla’s mounting inventory indicates a decline in its once unrelenting consumer demand. This surplus challenges the company’s image as a market leader in EVs and raises questions about its future strategy. As the piles of unsold cars grow, it remains to be seen how long Tesla can maintain the appearance of high demand while managing a significant overstock issue.
