Why Tesla Stock Plunged Today

The highly anticipated third quarter delivery report from adze (TSLA -3.43%) was released this morning and investors were disappointed. Tesla’s electric vehicle (EV) deliveries in the first half of this year were 6.5% lower than in 2023. Investors had expected to see growth resume in the third quarter.

The results actually showed that Tesla’s electric vehicle deliveries rose year-over-year, but investors knocked the stock down as much as 5.5% Wednesday morning. As of 11:25 a.m. ET, Tesla shares were still trading up 3.6%. The backlash was partly due to the fact that Tesla shares have already risen about 20% in the past month. But there was more to the story.

Tesla faces headwinds from two directions

Today’s announcement only showed the company’s production and delivery results. But investors have also been jittery as growing competition and resulting price wars have squeezed the electric vehicle leader’s profit margin this year. Investors will have to wait until Oct. 23 for Tesla’s full third-quarter financial update.

But while shipments received a more than 6 percent increase over last year, investors note that competitors are also posting strong sales increases. Several Chinese electric vehicle manufacturers reported record September deliveries yesterday and General Motors just reported a nearly 60 percent year-over-year increase in its electric vehicle sales in the third quarter.

It looks like the competition is starting to take significant market share away from Tesla. And while the overall EV market may resume stronger growth, profits may not follow as pricing pressure continues.

That said, Tesla is one of the only global electric vehicle manufacturers that makes a profit on its products. One potential piece of good news from Tesla’s report was in vehicle manufacturing. While shipments rose by around 6%, production increased by more than 9%. If these vehicles already have buyers and simply haven’t been delivered yet, Tesla could give investors a promising outlook for the fourth quarter.