(Reuters) – Tesla reported its first decline in annual deliveries on Thursday, as the automaker delivered fewer than expected electric vehicles in the fourth quarter and incentives failed to boost demand for its aging model lineup.

The company’s shares fell 3.5% premarket, a sign that investors are worried about the challenges facing CEO Elon Musk, who expected promotions, including interest-free financing, to begin in 2024 would lead to “slight growth” in deliveries.

Cuts in European subsidies, a shift in the US toward cheaper hybrid vehicles and tougher competition from China’s BYD have put Tesla under pressure.

In response, Musk transitioned Tesla to self-driving taxis and supported President-elect Donald Trump with millions of dollars in campaign donations in the hope that this could bring regulatory relief for the company.

Tesla delivered 495,570 vehicles in the three months ended Dec. 31, missing estimates of 503,269 units, according to 15 analysts surveyed by LSEG.

471,930 Model 3 and Model Y vehicles were delivered, as well as 23,640 units of other models, including the Model S sedan, the Cybertruck and the Model X premium SUV. 459,445 vehicles were produced in the October to December period.

According to 19 analysts surveyed by LSEG, deliveries for 2024 were 1.79 million, down 1.1% from a year ago and below estimates of 1.806 million units.

With self-driving technology still years away, analysts say Tesla will bet on cheaper versions of current cars and the Cybertruck in the near future to boost sales growth.

Analysts say the truck, known for its trapezoidal stainless steel body, is showing signs of weakening demand.

Meanwhile, Tesla vehicle registrations in Europe fell 24% in October, driven by a close race by Volkswagen Group, whose Skoda Enyaq SUV replaced the Model Y as the best-selling electric vehicle in the region, according to data research firm JATO Dynamics.

Lower prices and incentives reduced Tesla’s profit margin on vehicle sales last year. However, Wall Street expects demand to pick up in 2025 as the Federal Reserve cuts interest rates.

Tesla shares had risen more than 60% in the past year.

(Reporting by Akash Sriram in Bengaluru; Editing by Arun Koyyur)