Tesla Stock Falls After Vehicle Deliveries Drop 31% in Q1
【Summary】Electric automaker Tesla released its Q1 production numbers and vehicle deliveries yesterday showing a significant drop from Q4 2018. The automaker reported deliveries of 63,000 vehicles in the quarter, which is a jump of 110 percent from the same quarter last year, but 31 percent lower than Q4 2018.
Electric automaker Tesla released its Q1 production numbers and vehicle deliveries yesterday showing a significant drop from Q4 2018. The automaker reported deliveries of 63,000 vehicles in the quarter, which is a jump of 110 percent from the same quarter last year, but 31 percent lower than Q4 2018.
The news rattled Wall Street investors. According to Reuters, four Wall Street brokerages cut their price targets on the stock after deliveries of Tesla's higher-priced Model S and X dropped by nearly 50 percent in the first quarter. Reuters also reported that RBC analysts called Model S and X deliveries "very disappointing" and estimated the numbers would translate to a more than $1 billion shortfall in revenue compared to previous estimates.
Tesla shares fell 8.25 percent today to $267.74.
The report from Tesla confirms weakening demand for the automaker's more expensive Model S and Model X SUV. Out of the 63,000 vehicle delivered, approximately 50,900 were Model 3's and the remaining 12,100 vehicles were Model S and X's.
Tesla did manage to increase its deliveries in Europe and China, reporting deliveries exceeding 5 times higher than prior peak deliveries. Despite the ramp up in deliveries, Tesla reported that half of the customers in Europe that ordered a Model 3 have not taken delivery yet, resulting in a large number of vehicle deliveries to shift to the second quarter. At the end of Q1, Tesla said that approximately 10,600 vehicles were in transit to customers globally.
Tesla warned that because of the lower than expected delivery volumes and several pricing adjustments, Q1 net income is expected to be negatively impacted. However, Tesla said it ended the quarter with sufficient cash on hand.
Tesla reported that inventory of Model 3 vehicles in North America remains exceptionally low, reaching about two weeks of supply at the end of Q1, compared to the industry average of 2-3 months.
Although Model 3 inventory remains low, customers have been waiting almost three years for the long-promised $35,000 version. Tesla began taking orders for its mass-market Model 3 in March 2016. However, when the first Model 3's began rolling off the assembly line in July 2017, they were all the more expensive versions, including the Performance and all-wheel drive models, which cost significantly more.
The Performance Model 3 cost $59,500 without the optional Autopilot automated driving system. Adding Autopilot adds another $3,000 to the price.
On March 1, Tesla CEO Elon Musk said the lower price base Model 3, which is now called the Standard Range, was finally available to order with delivery in 2 to 4 weeks. However, Tesla pushed out the delivery times again. As of today, estimated delivery time is 6 to 8 weeks for the Standard Range Model 3, according to Tesla's website.
Tesla said that despite pull forward of demand from Q1 2019 into Q4 2018 due to the step down in the federal tax credit, U.S. orders for Model 3 vehicles significantly outpaced what the automaker was able to deliver in Q1.
Tesla blamed some of its delivery problems on currently having just a single factory in California producing all of its models. Vehicles built in its Fremont, California factory but must be delivered to customers all around the world, a significant logistics challenge. As a result, Tesla warned that production could be significantly higher than deliveries, as it was this quarter, when production exceeded deliveries by 22 percent.
Despite the slowdown in deliveries, The Model 3 remains a popular electric vehicle, especially in North America. Tesla claims that the Model 3 remains the best-selling midsize premium sedan in the U.S., selling 60 percent more units than the runner up.
It's still unclear if demand for the Model 3 will wane as more established automakers, including as Audi and BMW, introduce their own electric models to rival Tesla.
Tesla, however remains optimistic. The automaker says it still expects to deliver 360,000 to 400,000 vehicles in 2019.
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