After Converting Ev Lovers to Everyday Buyers, Tesla Increases Its Focus on Everyday Buyers

Tesla Inc. is anticipated to announce on Tuesday that it achieved another milestone in 2023 with a record-breaking year in deliveries, driven in large part by unwavering Elon Musk enthusiasts and tech-savvy early adopters. Analysts surveyed by Bloomberg estimate that the Austin-based electric vehicle (EV) manufacturer delivered almost 483,200 vehicles in the fourth quarter, likely surpassing its target of delivering 1.8 million cars for the year—a historic high for the company, albeit still a fraction of the volumes typically sold by industry giants like Toyota Motor Corp. or General Motors Co.

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As Tesla sets its sights on the next phase of growth, it faces the challenge of appealing to everyday consumers who prioritize factors such as price and ease of use in their vehicle choices. Tesla's Chief Financial Officer, Vaibhav Taneja, acknowledged this shift during an investor call in October, emphasizing the need to reach the next wave of EV adopters.

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However, entering the mass market presents Tesla with several hurdles. Inflation and high interest rates have made consumers more cautious about significant purchases, and concerns about safety and the availability of charging stations persist. The landscape is also becoming more competitive, with an expanding array of EV options beyond Tesla.

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Moreover, starting January 1, some Tesla models are expected to lose the full $7,500 federal EV tax credit due to stricter battery-component sourcing rules from China, impacting certain versions of the Model 3, according to the company's website.

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In an effort to tap into the mass market in 2023, Tesla reduced prices across its lineup, prioritizing volumes over profit margins. This strategy was particularly noticeable in China, a market where Musk acknowledged the challenges of competing. However, Tesla faces strong competition from China's BYD Co., which boasts a fresher lineup.

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Tesla's Cybertruck, a highly anticipated addition to its lineup, is yet to reach volume production and is at least a year away from profitability, according to Musk. The company is estimated to have delivered between 200 and 5,000 Cybertrucks in the quarter.

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Despite the challenges, Tesla has not provided guidance for its 2024 deliveries. The Model 3 and Model Y, accounting for about 97% of the company's deliveries in 2023, were first launched in 2017 and 2020, respectively. Some analysts, like Toni Sacconaghi of Bernstein, express skepticism about Tesla's prospects, citing an aging product lineup, no significant price reductions, and increased competition in the EV space.

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However, Tesla has strategic initiatives to boost future sales, including the revamped Model 3 with an updated design and extended range. The new Model 3, initially launched in China, is expected to reach the US in 2024. Additionally, a new version of the Model Y from Tesla's Shanghai plant is reportedly in the works.

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To expand its reach, Tesla is also diversifying its marketing efforts. While the company has built a powerful brand without traditional advertising, it has recently experimented with Google ads, highlighting offers such as leasing a Model Y for $399 a month.

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Owuraka Koney, a managing director at Jennison Associates, believes Tesla is taking significant steps to reach the next wave of potential customers. The Cybertruck, in particular, has drawn curious buyers to Tesla showrooms. Executives beyond Elon Musk, such as design chief Franz von Holzhausen and Lars Moravy, vice president of vehicle engineering, are becoming more vocal in marketing Tesla's products.

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Koney remains optimistic about Tesla's positioning in the global EV market, noting that, along with BYD, Tesla continues to be a major player driving volume in EV sales. Looking ahead, Koney believes Tesla will maintain a strong position in the evolving automotive landscape.