Tesla reported sharply lower first-quarter auto sales amid an underwhelming demand outlook for electric vehicles

Tesla reported a significant decrease in first-quarter auto sales on Tuesday, reflecting a subdued demand outlook for electric vehicles, while traditional automakers like Toyota saw an uptick in sales thanks to improved US inventories.

Elon Musk's company delivered 386,810 vehicles globally during the period, marking an 8.5 percent decline. This decline was attributed in part to weak sales in China, where Tesla faces stiff competition from local electric vehicle manufacturers. Additionally, Tesla cited disruptions caused by an arson attack on power lines in Germany, which impacted output at its European factory.

In contrast, General Motors reported a slight dip in sales, while Toyota experienced a surge compared to the same period last year when it faced severe inventory issues due to supply chain disruptions caused by Covid-19.

Analysts had anticipated a six percent overall increase in sales for the quarter, buoyed by a strong labor market and improved supply conditions. However, consumer spending may be dampened by higher interest rates.

Tesla attributed its sales decline to various factors, including production challenges at its California factory and disruptions caused by shipping diversions due to the Red Sea conflict. Analysts also suggested a slowdown in demand for Tesla vehicles, particularly in China, where competitors may have undercut prices to attract consumers.

Meanwhile, GM reported a 1.5 percent decline in US deliveries for the quarter, slightly higher than projected. Despite this, the company highlighted continued strong customer demand for its vehicles, with incentives below the industry average.

Toyota, on the other hand, saw a 20.3 percent increase in US auto sales, driven by gains across its nameplate and luxury brand Lexus, thanks to improved inventory levels.

Overall, the macro environment for car sales is described as "mixed," with potential buyers possibly delaying purchases amid expectations of interest rate cuts by the Federal Reserve later in the year. This sentiment could impact consumer spending in the near term.

Following the announcements, Tesla shares fell 4.6 percent, while GM and Toyota both saw slight declines in their stock prices.