By Akash Sriram and Hyunjoo Jin

(Reuters) – Tesla Inc on Sunday posted record quarterly vehicle deliveries, but quarter-on-quarter sales growth was modest despite price cuts as rising competition and a bleak economic outlook weighed.

Tesla delivered 422,875 vehicles for the first three months of this year, up 4% from the previous quarter. This was 36% higher than a year ago. In January, Chief Executive Elon Musk said Tesla could achieve 2 million vehicle deliveries this year, up 52% from last year.

Investors have been watching Musk’s gamble that cutting prices would stimulate sales, although they worry about eroding margins.

In January, Tesla slashed prices globally by as much as 20%, unleashing a price war after missing Wall Street delivery estimates for 2022. The basic Model Y that used to sell for $65,990 now costs $54,990.

If they wouldn’t have done the price cut, it would have been ugly. I think what it tells you is the economy is getting tough,” Gene Munster, managing partner at Deepwater Asset Management, said on Sunday.

“They showed an acceleration, but they didn’t accelerate to the level that Elon had suggested it would.”

Musk, who has missed his own ambitious sales targets for Tesla in recent years, said in January that 2023 deliveries could hit 2 million vehicles, absent external disruption, from 1.3 million in 2022.

The first-quarter deliveries compare with analyst expectations of 430,008 vehicles, according to Refinitiv data based on seven analysts.

According to a mean of estimates compiled by FactSet as of Friday, Wall Street was expecting Tesla to report deliveries of around 432,000 vehicles for the quarter, the Wall Street Journal and CNBC reported.

Tesla missed the figure analysts surveyed by Refinitiv and FactSet were expecting. Other estimates show Tesla beat Wall Street expectations with its 422,875 vehicles delivered.

Analysts surveyed by Bloomberg expected 421,164 vehicles would be shipped.

Tesla said consensus of more than 20 analysts called for 421,500 vehicles delivered, Tesla investor Gary Black said in a tweet. Reuters could not independently confirm that figure.

The consensus is “all over the place,” Munster said.

Tesla delivered 6% more of its mainstay Model 3/Model Y vehicles in the first three months of this year than in the previous quarter. But the number of deliveries for its higher-priced Model X/Model S vehicles slumped by 38%.

The carmaker produced more cars than it delivered, manufacturing 440,808 vehicles for the first three months of this year.

The automaker ramped up production at new factories in Texas and Berlin, and as China production recovered from a COVID-19 lockdown hit. Tesla tweeted on Sunday that its Texas factory built 4,000 Model Y this week, while the automaker said in late February that its German plant was producing 4,000 cars per week.

MORE PRICE CUTS?

Barclays analyst Dan Levy expected Tesla may be pressured to lower prices further as many automakers have matched the cuts and concerns about a weakening economy persist.

Tesla did not immediately respond to Reuters’ questions about whether further cuts are in store.

Further clouding the demand outlook are U.S. electric vehicle subsidies, which may fall on some models starting on April 18.

Tesla’s cuts in China ignited a price war, with Chinese rivals including BYD and Xpeng dropping prices to defend market share amid weakening demand.

Market leader BYD accounted for 41% of so-called new energy car sales in the world’s biggest auto market for the first two months of the year. Tesla, by contrast, had a share of 8%.

Musk warned that the prospect of recession and higher interest rates meant the EV maker could lower prices to sustain growth at the expense of profit. In January, Musk said the price cuts had stoked demand.

Tesla shares have soared more than 68% this year on hopes the company would win the price war it started, although the stock remains more than 50% below its November 2021 peak.

Shares have fallen since Tesla’s investor day on March 1 when Musk said little about how soon the EV maker might launch a more affordable, mass-market vehicle.

(Reporting by Akash Sriram and Urvi Dugar in Bengaluru and Hyunjoo Jin in San Francisco; Editing by Lisa Shumaker)