While most Americans were busy celebrating Independence Day this past weekend, California automaker Tesla Motors [NASDAQ:TSLA] announced its unofficial Q2 delivery and production figures, keeping up a promise it made back in April 2015 to publish estimates for quarterly automotive deliveries and production within a few days of the start of the subsequent quarter.
Unlike the weekend’s celebrations however, Tesla’s Q2 2016 production and delivery estimates contained some troubling news: Tesla has failed to meet its delivery and production targets for a second consecutive quarter. And while we should note here that Tesla’s announced figures are only estimates — we’ll have to wait for the official Q2 earnings report for final figures — Tesla’s production and delivery estimates are usually accurate to within 1 percent.
Earlier this year, Tesla set itself an ambitious delivery target of 17,000 vehicles for Q2, but managed to 14,370 cars, just under 85 percent of the number of vehicles it had hoped to deliver. Although Model X production during Q2 is far higher than it was earlier this year, Tesla’s recently launched all-electric SUV only accounted for 4,625 of the cars Tesla delivered during Q2. The Model S, with 9,745 estimated deliveries, remains Tesla’s strongest selling model.
We should note here that Tesla says that one of the reasons for the lower-than-expected figure was the high-number of customer-ordered cars in transit at the end of the quarter — 5,150 cars in total — which had still to arrive at local Tesla stores when the quarter ended. This high figure, representing more than a third of the total number of cars actually delivered during Q2 and 30 percent of the original delivery target, can be explained partly by the increased number of Tesla Model X SUVs now being shipped around the world to key markets in Asia and Europe, where the Model X is now starting deliveries in earnest. Given that shipping times to Europe from California and to China from California can be anything from four to eight weeks (depending on the route), we think this high ‘in-transit’ figure should not be treated as a red flag.
What’s more worrying however, is the lower-than-hoped production figures at Tesla’s Fremont facility, where the Model X and Model S are currently made. While Tesla had projected a total Q2 production total of 20,000 cars, it only managed to produce 18,345 cars during the quarter, representing a deficit of nearly nine percent between its actual and projected figures. While Tesla admits that its production figures were lower than it had hoped, it does point out that it has undergone a major production ramp up in recent weeks, with nearly 2,000 electric cars rolling off the production line per week at the end of the quarter.
Looking forward, it says it is on track to making up for the deficit during the second half of the year, reaching a target of 2,200 vehicles per week in Q3 and 2,400 vehicles per week by Q4. That, it says, means that it will produce and deliver somewhere in the region of 50,000 vehicles during the latter half of the year, equivalent to its entire 2015 production and delivery figures.
But while Tesla appears to be in control of its delivery and production figures, placing quality control over sheer volume, the news from Tesla, combined with the fallout from the first fatal crash last month involving a Tesla electric car being driven in Autopilot mode, has made Wall Street somewhat skittish.
In pre-market trading this morning, Tesla’s stock price fell more than 4 percent, although we note it has rallied slightly in the past hour, rising from the opening price of $209.73 per share to a peak of $213.29 per share at the time of writing. However, we note that the share price has yet again headed downward, prompted perhaps by the issuing of a Deutsche Bank note revising Tesla’s 2016 annual estimate to a loss of $0.42 per common share from an original prediction that it would make a profit by the end of the year of $0.09 per share.
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