Back at the start of this year, Tesla Motors [NASDAQ:TSLA] announced that it had delivered a total of 50,557 vehicles during 2015, just squeaking past its revised guidance of somewhere between 50,000 and 55,000 cars. Then, just over a month later during Tesla’s official year-end 2015 earnings call, Tesla CEO Elon Musk promised that Tesla would accelerate its vehicle production during 2016 to nearly double that figure to deliver between 80,000 and 90,000 this year.
Delivery figures that high, Musk said, would ensure Tesla would actually turn a profit by the end of the year, something that fans and investors have been eager to see for many years. Yet during Q1 and Q2 this year, Tesla seemed to struggle with its projection, managing to only deliver 29,190 cars during the first six months of the year and leaving it with a massive 50,810 vehicles to deliver before the end of the year in order to meet its own targets. And while hardened Tesla fans have never doubted Tesla’s ability to make good on its promise, many on Wall Street have worried that Tesla was trying to do the impossible.
Yesterday however, Tesla gave the first indication that it may indeed make good on its delivery promise for the year with the release of preliminary Q3 delivery figures that show it managed to ship a massive 24,500 cars from July through September. This leaves it a 26,310 car delivery target for Q4 in order to meet the lower-end of its 80,000-90,000 car prediction.
In the announcement made yesterday Tesla reminds us that the figures, released in line with its established practice of announcing previous-quarter delivery figure estimates a few days after the end of said quarter, are an estimate based on the total number of cars Tesla stores around the world are believed to have sold and delivered during the quarter.
Since Tesla does not count a car as having been delivered until it all the necessary paperwork has been completed and the car is in the physical possession of its new owner, there’s often a small difference between Tesla’s estimated figures and the official figures used in its quarterly report. Historically, Tesla has always been somewhat conservative on its estimated figures, meaning its actual quarterly figure may be a few percent higher.
Of the cars estimated to be delivered during Q3 2016, Tesla says roughly 15,800 Model S sedans were delivered and 8,700 Model X SUVs. That’s far higher than the 14,402 cars it delivered during Q2 — made up of 9,864 Model S and 4,638 Model X cars.
Unlike last quarter, where Tesla managed to produce far more cars than it delivered, Tesla managed to sell more cars during the quarter than it produced. At the end of the quarter, Tesla says it had managed to produce 25,185 vehicles, of which 5,500 were still classed as being ‘in transit’ at the quarter’s end.
That means that Tesla shipped or delivered 30,000 cars during the quarter, 4,815 more than it produced, which should have helped reduce the number of cars in Tesla’s inventory dramatically. For Musk, who has been pushing staff hard to get as many cars sold and delivered as possible, this news must be extremely welcome.
While we won’t know the full drill down on vehicle sales or specifications until Tesla makes its Q3 earnings report available next month, it’s worth remembering that recent third-party estimates suggest that as many as one-third of all Tesla Model S cars being sold right now are actually going to Tesla Model 3 reservation holders who have either decided to upgrade to a Tesla Model S rather than wait for a Model 3 or taken advantage of new, lower-priced two-year lease deals on the recently-refreshed Tesla Model S 60.
Tesla’s latest delivery and production estimates is welcome news for Tesla fans and shareholders, and, based on previous production and delivery growth, leaves the 80,000-90,000 car guidance well within reach. But while Tesla may achieve its goal in terms of delivery and production for 2016, there’s still some question as to if it will manage to turn a profit by the end of the year.
That will depend on far more than delivery figures, and given the massive financial commitment Tesla currently faces from the Gigafactory, Model 3 development and the impending acquisition of loss-making SolarCity [NASDAQ:SCTY] we’re guessing many analysts will need to see a lot more evidence from Tesla before their expectations and Tesla’s line up.
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