EV Demand Cliff or Just a Blip? Tesla Deliveries Plummet 31% in First Quarter
Tesla announced its Q1 production and delivery numbers last night—and the news is not good.
Electric vehicle pioneer Tesla announced its first-quarter delivery numbers last night — and the news is not good.
After pulling out all the stops to deliver a record 90,700 cars last quarter, Tesla delivered just 63,000 cars this quarter. That’s a drop of 31 percent; below the company’s moving-target guidance and below analysts’ already rolled-back expectations. Bloomberg’s Model 3 tracker missed production numbers by 26 percent.
Tesla began its Model 3 delivery efforts in Europe and China this quarter, and the delivery miss can be partially attributed to the headwinds of overseas transport, homologation, new distribution channels and tariffs. But Tesla’s most profitable vehicles, the S and X, saw their deliveries drop 56 percent from the previous quarter — and that’s bad news for margins.
Last quarter, CEO Elon Musk said that he was optimistic about being profitable in the first quarter “and all quarters going forward.” The target was to reach “a very small GAAP net income in Q1.”
But confronted with this delivery shortfall and a decline in average selling prices, Musk now expects Q1 net income to be “negatively impacted.”
The CEO added, “Even so, we ended the quarter with sufficient cash on hand.” Tesla has a $566 million debt due in November and will need capital for Model Y production and a number of other projects. Tesla also has a considerable amount of cash tied up in inventory and the approximately 10,000 vehicles now in transit to customers.
Tesla stands behind 2019 delivery guidance
The company maintained its guidance of 360,000 to 400,000 vehicle deliveries in 2019. Given the recent miss, meeting Tesla’s guidance will require more than 100,000 vehicles built per quarter in 2019, a higher level than Tesla has ever achieved. It will require a sustained rate of 7,500 units per week, more than the Fremont factory has been able to maintain, and perhaps more than its paint shop or production line can handle.
There is a small chance that Tesla’s China factory will be built and producing vehicles in 2019, but this would require unprecedented speed of construction, equipment installation and production ramp.
This quarter-to-quarter drop in sales at Tesla breaks an almost two-year growth streak and threatens Tesla’s growth narrative, valuation and its ability to service its debt.
Shares were down more than 7 percent in pre-market trading on Thursday, to around $270.
Tesla and Elon Musk have a busy April ahead of them: Tesla’s Q1 cash flow and financial performance will be revealed in its earnings letter, expected at the end of the month. There’s an investor event focused on autonomous driving scheduled for April 19.
And today, April 4, Federal Judge Alison Nathan will hear arguments in a suit filed by the U.S. Securities and Exchange Commission looking to hold Musk in contempt for violating a settlement agreement. The civil contempt charge stems from Musk’s non-approved tweet making conflicting claims about the firm’s 2019 delivery guidance.
If found guilty, Musk could face restrictions on social media, a fine, or most unlikely, his removal as CEO.