10:51 AM EDT, 03/28/2024 (MT Newswires) -- Tesla's (TSLA) Q1 has been a "nightmare quarter" as deliveries have suffered greatly due to persistently soft demand in China at the start of the year, Wedbush said in a report emailed Thursday.

Supply challenges, including factory downtimes and the fire at its Berlin factory have hampered the company, the analysts said.

"There is no denying this has been a quarter to forget for Musk and Tesla," Wedbush said, adding that "further issues this quarter were compounded by the Model 3 Highland upgrade issues in the US /Fremont and flattish sales in Europe."

China's challenging market, compounded by rising electric vehicle competition, remains a major concern for the company, with delivery estimates down 3% to 4% year-over-year this quarter. The current negative narrative surrounding Tesla is warranted, given sluggish growth and squeezed margins, especially in China. Wedbush said. "For Musk this is a fork in the road time to

get Tesla through this turbulent period otherwise darker days could be ahead," it added.

Wedbush said turning the situation around will require formal guidance on margins and deliveries, addressing demand issues in China, hosting a battery/AI day, Musk's commitment to the chief executive role, and initiating an advertising campaign.

Despite near-term challenges, Tesla's EV market dominance is expected to strengthen, with the company's Full Self-Driving/AI software growth going forward. "However, getting through this white knuckle period will be a defining chapter for Musk & Co. and the future of Tesla."

Wedbush maintained an outperform rating on Tesla and lowered its price target to $300 from $315 to account for the softer deliveries and reduced estimates.

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