In a highly anticipated move, Tesla, the electric vehicle (EV) giant, has unveiled its production and delivery figures for the third quarter of the year. The results, however, seem to have left investors and analysts with mixed feelings. On one hand, the company still managed to deliver over 435,000 vehicles, which is a record for the third quarter. But on the other hand, the numbers missed consensus estimates by a significant margin, and the sequential decline in deliveries is a cause for concern.
Missing the Mark
According to data sourced from Bloomberg, Tesla reported the delivery of 435,059 vehicles and production of 430,488 vehicles for Q3, falling short of consensus delivery estimates, which stood at a more optimistic 456,722. Breaking down the numbers further, Tesla delivered 15,985 Model S/X vehicles, which fell short of estimates set at 17,721 vehicles. Meanwhile, the Model 3/Y deliveries reached 419,074, again missing estimates that stood at 439,362.
The disappointment in these numbers was evident as Tesla’s shares dipped by as much as 3.5% in pre-market trading on Monday. This drop in stock value did slightly recover later, but it’s undeniable that Tesla’s report has missed even the most modest street estimates.
CNBC’s analysis, based on a consensus of analysts polled by StreetAccount, projected an even higher figure of 461,640 deliveries for the quarter. Interestingly, Tesla itself had given hints about its anticipated numbers, as social media posts last week suggested the company was aiming for around 455,000 deliveries.
A Historic Decline
A notable aspect of these Q3 results is the drop in total deliveries since Q2 of last year. Tesla’s Q3 2023 delivery numbers marked a sequential decline of 21.9% from Q2 2023, marking the first such drop since Q2 2022. Total deliveries fell from 564,743 vehicles to 435,059 vehicles, with Model 3/Y deliveries declining from 473,820 vehicles to 419,074 vehicles. Model S/X deliveries also fell from 20,923 vehicles to 15,985 vehicles. The sequential decline is particularly concerning given that the Model 3/Y is Tesla’s most popular and profitable segment. The company has attributed the decline to planned downtime for factory upgrades and supply chain disruptions.
Explaining the Miss
Tesla did not shy away from acknowledging this shortfall and attributed it to planned downtimes for factory upgrades. The company’s press release stated, “sequential decline in volumes was caused by planned downtimes for factory upgrades, as discussed on the most recent earnings call.”
CEO Elon Musk had previously addressed the potential production hiccups due to “summer shutdowns for a lot of factory upgrades” during the company’s last conference call.
Moreover, Tesla’s Q3 2023 delivery decline can be attributed to a combination of factors. Notably, shortages in the supply chain brought on by COVID-19’s lingering impacts, the situation of Russia-Ukraine war, and port congestion made it difficult to buy crucial parts, which in turn reduced Tesla’s ability to produce. The prolonged United Auto Workers strike also added uncertainty to Tesla’s supply chain, raising worries about future manufacturing delays. Additionally, there seemed to be less of a desire for EVs amid the economic unrest marked by rising inflation and interest rates, which may have led buyers to put off buying luxury EVs. Tesla’s choice to raise vehicle pricing in response to rising material and manufacturing costs may have unintentionally reduced the accessibility and competitiveness of its products. Despite these complex issues, Tesla has not yet provided a thorough justification for the drop in deliveries.
The way forward
Despite the challenges, Tesla remains optimistic about its full-year delivery target of 1.8 million vehicles. The company has said that it expects to ramp up production in the second half of the year, as it completes its factory upgrades and gets its supply chain back on track. However, the company is yet to provide updates on the sales of its semi-truck or the highly anticipated Cybertruck. Investors will have to wait until October 18 for a comprehensive insight into the company’s financial performance, as Tesla has announced that it will report earnings on that date.
Intriguingly, this quarter’s earnings report will mark the first under the leadership of Chief Accounting Officer Vaibhav Taneja in the role of Chief Financial Officer (CFO). The market will be watching closely to see how this change impacts Tesla’s financial strategy moving forward.