Things keep getting worse for Tesla

• Tesla might be facing another difficult quarter, Baird analysts warn.

• The firm said Tesla could face a 5% decline in sales compared to its second quarter in 2023.

• Last week, the carmaker reported its first year-over-year drop in sales since 2020.

Tesla could be hit with another difficult quarter after the company reported earlier this month that sales dropped year over year for the first time since 2020.

The electric-car maker could face a "messy" three months ahead, analysts from Baird said. Ben Kallo, an analyst at the financial-services firm, said in a note that he anticipates the automaker to deliver nearly 5% fewer cars in the second quarter of 2024 compared to the same period last year, MarketWatch reported.

"We think Q1 results will be messy due to several one-time items and continue to believe Q2 estimates are likely still high," Kallo wrote in the note.

The analyst said Baird anticipates Tesla will continue to face difficulty boosting sales in the months ahead because of high interest rates and declining demand for EVs.

"There is no denying that the demand environment has deteriorated," Kallo wrote.

Despite the warning note about future delivery numbers, Baird removed Tesla from its Bearish Fresh Pick list, citing Elon Musk's announcement that Tesla will unveil its first robotaxi in August, as well as growth in the energy business. The company was originally put on the list after a Delaware judge struck down Musk's $55 billion pay package.

"We speculate Tesla likely unveils both a robotaxi and a $25k vehicle," Kallo wrote. "In the past Tesla shares have traded higher into these events and become a 'sell the news' event."

Musk announced that the company would show off its first robotaxi not long after Reuters published a report that said Tesla had abandoned plans for its $25,000 EV. In response, Musk wrote on X that "Reuters is lying (again)."

Last week, Tesla's first-quarter delivery numbers fell below Wall Street's estimates, dropping 20% from the previous quarter and over 8% year over year. At the time, Tesla blamed the decline on its production ramp for the refreshed Model 3, an arson attack at its Berlin factory, and supply-chain issues caused by the Yemeni Red Sea conflict. Tesla's stock dipped more than 5% on the day the delivery numbers were released and it's down around 30% year to date.

For his part, Musk has said Tesla is "between two major growth waves." But it's unclear when the automaker will step out of the slump.

The Tesla CEO has said "We dug our own grave" with the production ramp-up for the Cybertruck. Meanwhile, Musk is already making plans for what sounds like an ambitious second-generation Tesla Roadster.

A spokesperson for Tesla did not immediately respond to a request for comment.

Correction: April 10, 2024 — An earlier version of this story misstated the timeframe of Tesla's drop in sales. The drop took place on a year-over-year basis, not to the lowest point since 2020.

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