Tesla ( TSLA ) reported record third-quarter vehicle deliveries on Sunday, but they came in well below views. The report may reinforce concerns about demand, particularly in China, as Elon Musk’s electric vehicle giant ramps up production capacity.
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Shares of Tesla fell solidly on Monday morning after hitting near-term lows on Friday.
Tesla delivered 343,830 electric vehicles in the third quarter, up 42% from a year earlier and surpassing the first-quarter record of 310,048. It was also 35% higher than the 254,695 in the second quarter. The Shanghai plant faced a prolonged shutdown and slow recovery in the second quarter due to the Covid lockdowns.
But analysts expected Tesla deliveries between 350,000 and 370,000, with the consensus slightly above 360,000.
Considering Tesla’s big expansions over the past six months, the increase is relatively modest. Tesla Berlin opened in March and the Austin plant in April, though those locations are still being ramped up slowly. The Shanghai site got a big capacity upgrade in July and early August, with those moves temporarily curtailing production.
In fact, Tesla’s production significantly outpaced deliveries in the third quarter, with the electric vehicle giant producing 365,923 vehicles last month.
Tesla delivered 325,158 Model 3 and Model Y vehicles in the third quarter, along with 18,672 Model S and Model X luxury electric vehicles.
In its press release, Tesla cited logistical challenges and an increased number of vehicles in transit.
Tesla China Demand Concerns
There are signs that demand for Tesla is not strong enough to meet the increased capacity, especially in China.
However, Reuters reported last week that Tesla plans to keep production at the upgraded Shanghai plant at around 93% capacity until the end of the year. Recent improvements to the plant increased production capacity by almost a third.
Tesla China’s wait times for new vehicles fell sharply in September, indicating little or no backlog. Wait times have increased modestly again as Tesla resumes exporting vehicles from Shanghai at the start of the quarter.
Tesla began offering a new insurance subsidy in China last month, which served as a de facto price cut. This insurance subsidy will now be extended until the end of the year.
There is speculation that Tesla will announce a full price cut in China in early October. Another option is for Tesla to export an even larger portion of its production from Shanghai. There are some reports that this is already happening, with Shanghai switching to export a few days earlier. That’s why Tesla has more vehicles on the road.
But European backlogs are also starting to drop, and Tesla has recently introduced a shorter-range Model Y, often at a much lower price than the previous base model. In addition, the Berlin plant should slowly account for a larger share of Tesla’s European sales.
Adding to the pressure: BYD ( BYDDF ) and Nio ( NIO ) have just introduced rivals to the Model 3, and the Model Y is likely to face increased competition over the next year.
Tesla electric vehicles
Tesla produces the Model S luxury sedan and the Model X SUV, as well as the Model 3 sedan and the Model Y crossover. However, the vast majority are the Model 3 and Model Y models.
Other vehicles, including the Semi and Cybertruck, have been pushed back multiple times. Musk has said the Cybertruck is on track for mid-2023, and the Tesla Semi will begin deliveries in late 2022.
The Tesla Q3 deliveries came on the heels of Tesla’s AI Day on Friday, in which the company showed off its latest Optimus humanoid robot prototype, as well as AI advances in driver assistance software. Musk tweeted that the event was primarily a pitch to recruit AI and robotics engineers.
Tesla stock
Tesla shares fell more than 5% before the market opened on Monday. It would be the lowest since late July. Shares fell 1.1% to 265.25 on Friday, off recent lows. The stock retreated from its 50-day moving average during the week.
Tesla shares are in a long consolidation with a buy point at 402.73, according to MarketSmith. Investors could see the pattern as a long double bottom base, offering an entry at 384.35. However, TSLA’s stock chart is on the move.
But there’s also a smaller foundation within last year’s loose, broad action. Now looking like a small double bottom pattern, TSLA stock has an entry at 313.90.
Tesla has a composite rating of 83. It has a relative strength rating of 78, an exclusive IBD Stock Check indicator of share price movement on a scale of 1 to 99. The rating shows how the A stock’s performance over the past 52 weeks is held against all other stocks in the IBD database. EPS rating is 77.
Clash of the Titans: Tesla Vs. BYD
Tesla China Rivals
Musk and Tesla also face new competition in China’s electric vehicle market from BYD, Nio, Li Auto ( LI ) and XPeng ( XPEV ). Nio, Li Auto and Xpeng reported September deliveries on Saturday, with BYD sales also in early October.
NIO and BYD head to Europe in a challenge to Tesla
BYD, the world’s largest maker of electric vehicles and plug-in hybrids and China’s biggest seller of pure electricity, is taking on Tesla’s Model 3 head-on for the first time. The BYD badge, with similar specs but $10,000 less than a Model 3, started deliveries in late August.
Luxury electric vehicle startup Nio began deliveries of the Model 3 rival ET5 on September 30.
BYD and Nio are also looking to establish a foothold in the European market, after starting sales in Norway in 2021. BYD unveiled three all-electric models for Europe at a virtual event on September 28, and Nio is slated for a similar event in October 7. BYD recently began deliveries to Australia, India and several other Asian nations, with several other markets rolling out in the coming months.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
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Third leg for the bear market? Tesla deliveries fall short