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Tesla sales decline as pandemic hampers production

Tesla said on Saturday that vehicle deliveries from April to June fell 18 percent from the first quarter of the year, an unusual slowdown for the company caused by production problems in China.

Tesla sells more electric cars than any other company and, until recently, was expanding rapidly in China, Europe and the United States as rising gasoline prices increased the appeal of battery power. The company continues to weather the supply chain turmoil better than rivals such as General Motors and Toyota, both of which reported sharp declines in sales on Friday.

Cars, especially electric cars, are in high demand, but shortages of semiconductors and other key components are forcing buyers to wait many months for deliveries.

Tesla delivered more than 254,000 vehicles in the quarter compared to 310,000 in the first quarter. It was the first quarterly decline in deliveries since the beginning of 2020, when the start of the pandemic undermined car sales around the world.

Tesla on Saturday suggested deliveries could pick up in coming months as it overcomes supply chain problems and said it made more cars in June than ever before in its history.

Closures and component shortages related to the pandemic hampered operations at the company’s factory in Shanghai. China has the world’s largest car market, accounting for about 40 percent of Tesla’s sales.

Production in China was “an absolute disaster in the months of April and May,” Daniel Ives and John Katsingris, analysts at Wedbush Securities, said in a note to investors last week.

Despite the slowdown in deliveries, Tesla is still doing better than other automakers. Compared to the first quarter of 2021, Tesla deliveries were up 26 percent. That’s a lot better than General Motors, which said Friday that its second-quarter U.S. new-vehicle deliveries were down 15 percent from a year earlier. Similarly, Toyota Motor reported a 23 percent drop in sales in the United States.

Tesla has more orders than it can fill, but demand could decline if the global economy hits a bump. Elon Musk, CEO of Tesla, warned in an interview with Bloomberg News in June that a recession was “inevitable at some point” and would “more likely than not” come soon. He has told staff that the company will cut 10 percent of its salaried workforce.

It seems unlikely that Tesla will match its growth from last year, when deliveries jumped 90 percent to 940,000 cars. A 50 percent increase by 2022 is more realistic, Wedbush analysts said.

That, they said in a note on Saturday, is still “an impressive feat” considering China was “essentially in lockdown for two months.”

The slower growth rate is one factor that has prompted investors to reassess Tesla’s chances of dominating the auto business. Shares of Tesla have fallen more than 40 percent since their peak in November, even as more and more buyers choose electric cars because of their superior energy efficiency.

Based on local utility rates, an electric car costs significantly less to operate than a fossil fuel vehicle. A standard range Tesla Model 3 gets the equivalent of 142 miles per gallon and costs $450 per year in fuel, according to the Environmental Protection Agency. By comparison, a gasoline-powered Honda Accord gets 33 miles per gallon and costs $2,200 a year in fuel.

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