What happened

Shares of Tesla (TSLA -1.11%) fell by as much as 13.4% this week, according to data from S&P Global Market Intelligence. The leader in electric vehicles (EVs) and one of the most valuable stocks in the world posted disappointing delivery numbers for the first quarter of 2023 as it continues to build up inventory. Shares of Tesla were down 10.8% this week and are down 47% over the last 12 months.

So what

Every quarter, Tesla updates investors with how many cars it produced and delivered to customers over the last three months. In the first quarter of 2023, Tesla produced about 441,000 EVs around the globe and delivered 423,000 to customers.

Deliveries were up 36% year over year, indicating the company once again gained market share.

But it is not all sunshine and rainbows at Tesla right now. The first quarter was another period where vehicle production outpaced deliveries to customers (by 18,000, to be exact), meaning that Tesla is building inventory that customers are not buying at current prices.

This occurred throughout 2022 as well, with the company producing 56,000 more cars than it sold last year. This indicates that Tesla is struggling to find more buyers for its EVs as it tries to become a mainstream automaker.

What's even more concerning is that the company implemented severe price cuts throughout the first quarter to try to spur customer demand. Price cuts are never good for a retailer, but are especially worrisome in a high-inflation environment where Tesla's costs are creeping higher.

If lower prices can't muster up enough demand to close this production-delivery differential, Tesla is going to have to lower prices again or risk having rapidly depreciating vehicles sitting in its lots. 

Now what

Tesla has been one of the top-performing stocks of the last decade and is currently the eighth most-valuable company in the world by market cap. 

But that does not mean it is going to perform well in the future. The stock trades at a nosebleed price-to-earnings ratio of 51, indicating the market is pricing in tons of future earnings growth.

The problem is, it is likely that Tesla's earnings will decline in 2023 due to rapid margin compression caused by falling sale prices and rising input costs. This is not a recipe for strong forward stock returns. Look beyond Tesla for safer bets for your investing dollars right now.