Should The Sharp Decline In Tesla Model X and S Deliveries Worry Investors?

by Trefis Team
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Tesla (NASDAQ: TSLA) published its quarterly delivery and production data for Q1 2019. Below, we provide some of our thoughts and takeaways from the release.

How did Tesla’s deliveries and production trend over Q1 2019?

  • Tesla delivered ~ 63,000 vehicles, down 30% sequentially, and missed street and Trefis estimates
  • 50,900 Model 3s delivered, which was down 20% sequentially
  • 12,100 Model S and X vehicles delivered, down 56%
  • Production fell to 77,100 vehicles, down 11% sequentially

What caused the decline in Model 3 deliveries?

  • Tesla pushing to scale-up Model 3 sales in Europe and China, where logistical issues have hurt deliveries
  • 10,600 vehicles (all models) were in transit at end of Q1, causing deliveries to shift to Q2. For perspective, only 3k vehicles were in transit at the end of Q4 2018.
  • However, demand appears to remain strong, with U.S. orders for vehicles outpacing deliveries in Q1. Moreover, Tesla’s move to start selling the base $35k model could help.

Why did Model X and S sales plummet?

Although Tesla did not spell out the exact reasons for the decline in S and X sales, we see a couple of possible factors:

  • The halving of the $7,500 federal tax credit may have hurt interest
  • Tesla has stopped production of lower-priced 75 kilowatt-hour battery versions of S and X
  • An anticipated interior or design upgrade may be causing some buyers to hold off for now
  • Multiple price revisions over the quarter may have also dampened potential buyer interest
  • Potential cannibalization from higher-end Model 3 variants

How will the lower deliveries impact Tesla’s financials?

  • It’s possible that Tesla could return to the red after posting positive EPS over the last two quarters
  • The Model 3 issues are likely transitory, as production is scaling up (likely above 5k units/week) and new markets are being tapped
  • However, the lower mix of Model S and X could be of concern, considering that margins are higher compared to Model 3.
  • Tesla’s full-year plans still remain intact, with projected deliveries of between 360,000 and 400,000 vehicles this year.

 

We have created an interactive dashboard analysis that breaks down our price estimate for Tesla, based on key drivers including Model 3, S, and X average selling prices and deliveries. You can modify inputs for Tesla’s pricing, volumes, and margins to arrive at your own valuation for the company. In addition, you can view all Trefis Consumer Discretionary company data here.

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