Tesla Again Fails to Meet Expectations: Decline in Deliveries and Rise in Inventory

Tesla started 2026 with its weakest quarterly deliveries in the past year, missing Wall Street expectations as the weakening of U.S. incentives and increasing global competition burden its core electric vehicle business. Shares of the company led by Elon Musk fell more than four percent, after already losing about 15 percent since the beginning of the year.

Data also indicates a growing imbalance between production and demand. Tesla produced 50,363 vehicles more than it delivered during the quarter, marking the largest gap in four years, signaling a buildup of unsold inventory.

– “I believe that the rise in inventory is a result of the new reality following the expiration of tax incentives for electric vehicles, as well as increasing competition and the need for lower interest rates to stimulate demand,” said advisor at Camelthorn Investments Shawn Campbell, who owns Tesla shares.

– “The only positive thing is that high fuel prices will likely encourage more people to consider electric vehicles, but it will take time for that to reflect in the numbers and requires a prolonged period of high fuel prices,” he added.

The world’s most valuable car manufacturer is facing increasing competition, having lost its leading position in electric vehicle sales to Chinese BYD last year, under pressure from traditional manufacturers and cheaper Chinese rivals. Nevertheless, sales of Tesla vehicles produced in China rose for the second consecutive quarter — increasing by 23.5 percent year-on-year from January to March.

The expiration of the $7,500 federal tax credit in the U.S. at the end of September negatively impacted demand for electric vehicles, removing a key incentive for purchase. Approval of Tesla’s Full Self-Driving system in Europe has also been delayed, with a decision from the Netherlands expected this month, which could enable broader application and stimulate demand.

– “Tesla’s deliveries in the first quarter reflect the expiration of tax incentives in the U.S. as well as the fact that FSD has not yet been approved in the EU. These factors are likely to continue to pressure deliveries until Tesla receives approval in the EU and until we enter the fourth quarter in the U.S.,” said Morningstar analyst Seth Goldstein.

Tesla delivered 358,023 vehicles in the first quarter, below analyst estimates of 368,903, according to data from Visible Alpha. Deliveries increased by 6.3 percent compared to last year, when protests against Musk’s far-right policies affected demand. Smaller competitor Rivian Automotive delivered more vehicles than analysts expected in the first quarter.

Although Europe negatively impacted Tesla’s global results last year, the company has since shown signs of stabilization, increasing its market share in key markets like France in the first quarter of 2026. Tesla has recorded two consecutive years of declining deliveries, and some analysts are now warning of the possibility of a third year of decline.

Investors Look at the Bigger Picture

Wall Street is increasingly overlooking quarterly delivery numbers, analysts point out, as Musk steers the company towards solar energy, humanoid robotics, and autonomous taxis.

– “As always with Tesla, a few thousand vehicles more or less are unlikely to significantly impact the valuation. The bulk of the investment story is based on the future, not on the current state of the core automotive business,” said Matt Britzman from Hargreaves Lansdown, who also owns Tesla shares.

Tesla’s valuation of around $1.4 trillion largely depends on future ambitions, although car sales still form the backbone of revenue. Tesla launched a limited robotaxi service in Austin last June and plans rapid expansion throughout 2026, although it is currently significantly smaller compared to Waymo, while Cybertruck production is ramping up.

The company also announced that its energy storage division, which is becoming an increasingly important part of the business, delivered 8.8 gigawatt-hours of energy products in the first quarter, a decline of 15.4 percent compared to the previous year. Meanwhile, Musk’s company SpaceX has confidentially filed for an IPO in the United States, targeting a valuation of 1.75 trillion dollars, higher than Tesla’s.