Tesla's record deliveries raise demand concerns

Tesla’s record deliveries raise demand concerns

You’re here (TSLA) reported record third-quarter vehicle deliveries on Sunday, but they are well below views. The report could heighten concerns about demand, particularly in China, as Elon Musk’s electric vehicle giant ramps up production capacity.


Tesla stock fell sharply on Monday morning after breaking above short-term lows on Friday.

Tesla delivered 343,830 electric vehicles in the third quarter, up 42% from a year earlier and topping the first quarter record of 310,048. It was also 35% higher than Q2’s 254,695. The Shanghai factory faced a long shutdown and slow recovery in the second quarter due to Covid lockdowns.

But analysts had expected Tesla deliveries of 350,000 to 370,000, with the consensus just above 360,000.

Considering Tesla’s big expansions over the past six months, the increase is relatively modest. Tesla Berlin opened in March and the Austin plant in April, though those locations continue to grow slowly. The Shanghai site benefited from a major capacity upgrade in July and early August, with these movements temporarily limiting production.

Indeed, Tesla’s production far exceeded deliveries in the third quarter, with the electric vehicle giant churning out 365,923 vehicles last month.

Tesla delivered 325,158 Model 3 and Model Y vehicles in the third quarter, as well as 18,672 Model S and Model X luxury electric vehicles.

In its press release, Tesla cited logistical challenges and an increased number of vehicles in transit.

Concerns over Tesla’s demand in China

There are indications that Tesla’s demand is not strong enough to meet the increased capacity, particularly in China.

However, Reuters reported last week that Tesla plans to keep production at the modernized Shanghai factory running at around 93% capacity until the end of the year. Recent improvements to the plant have increased production capacity by almost a third.

Tesla China’s wait times for new vehicles fell sharply in September, reporting little to no backlogs. Wait times rose slightly again as Tesla returned to exporting vehicles from Shanghai at the start of the quarter.

Tesla began offering a new insurance subsidy in China last month, serving as a de facto price reduction. This insurance subsidy will now continue until the end of the year.

There is speculation that Tesla will announce an outright price cut in China in early October. Another option is for Tesla to export an even larger share of its production to Shanghai. Reports say this is already happening, with Shanghai switching to export a few days earlier. This could explain why Tesla has more vehicles in transit.

But European backlogs are also starting to dwindle, with Tesla recently introducing a shorter-range Model Y there, often at a much lower price than the previous base model. Additionally, the Berlin plant is expected to slowly take a bigger share of Tesla’s European sales.

Add to Pressure: BYD (WILL) and Nio (NIO) has just introduced its Model 3 rivals, with the Model Y likely to face increasing competition over the next year.

Tesla electric vehicles

Tesla produces the Model S luxury sedan and the Model X SUV as well as the Model 3 sedan and the Model Y crossover. However, the vast majority are the Model 3 and Model Y models.

Other vehicles, including the Semi and Cybertruck, were repeatedly pushed back. Musk said the Cybertruck is on track for mid-2023 and the Tesla Semi will begin deliveries by the end of 2022.

Tesla’s third-quarter deliveries followed Tesla’s AI Day on Friday, where the company showcased its latest humanoid robot prototype Optimus, as well as AI advances in assistive software. the driving. Musk tweeted that the event was primarily a pitch to recruit artificial intelligence and robotics engineers.

Tesla Stock

Tesla stock fell more than 5% before Monday’s market open. That would be the lowest since late July. Shares fell 1.1% to 265.25 on Friday, undercutting recent lows. Stocks retreated from the 50-day moving average during the week.

Tesla shares are in a long consolidation with a buy point of 402.73, according to MarketSmith. Investors could view the pattern as a long double bottom base, offering entry at 384.35. However, the TSLA stock chart is changing.

But there’s also a smaller base in the broad and loose action of the past year. Now looking like a small double bottom pattern, TSLA stock has an entry at 313.90.

Tesla has a composite rating of 83. It has a relative strength rating of 78, an IBD Stock Checkup proprietary gauge for stock price movement with a score of 1 to 99. The rating shows how a stock’s performance in over the past 52 weeks resists all other stocks in the IBD database. The EPS rating is 77.

Clash of the Titans: Tesla Vs. BYD

Tesla’s rivals in China

Musk and Tesla also face new competition in the Chinese electric vehicle market from BYD, Nio, Li-Auto (LI), and XPeng (XPEV). Nio, Li Auto and Xpeng announced September deliveries on Saturday, with BYD sales also slated for early October.

NIO and BYD target Europe to challenge Tesla

BYD, the world’s largest maker of electric vehicles and plug-in hybrids and China’s largest seller of pure electricity, is going head-to-head with Tesla’s Model 3 for the first time. The BYD Seal, with similar specs but $10,000 less than a Model 3, began shipping in late August.

Luxury startup EV Nio began deliveries of the ET5, a Model 3 rival, on September 30.

BYD and Nio are also looking to solidify their position in the European market, having started sales in Norway in 2021. BYD showcased three all-electric models for Europe at a virtual event on September 28, and Nio is ready for a similar event on October 28. 7. BYD recently began deliveries to Australia, India and several other Asian countries, launching in several other markets over the next few months.

Please follow Kit Norton on Twitter @KitNorton for more coverage.


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