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Nevertheless, there was no evidence that Tesla was struggling to sell his cars – until now.
On Wednesday, Tesla announced appalling levels of production and deliveries for the first quarter. It is becoming increasingly clear that the demand for Model 3 does not meet the high expectations of buyers, while sales of the more expensive models Model S and X are in free fall.
Model 3's request does not impress
Tesla built 62,950 models 3 in the last quarter and delivered 50,900 models. Both figures represent strong year-over-year increases. In the first quarter of 2018, Tesla built fewer than 10,000 models 3 – and delivered 8,180 – because it was still early in the process of increasing production.
That said, looking at things sequentially sheds a different light on Tesla's performance in the first quarter. In the fourth quarter of 2018, Tesla built 61,394 models 3 and delivered 63,150 models.
Tesla Model 3 in silver on a road, with a green field in the background.
Model 3 shipments decreased sequentially in the first quarter. Source of the image: Tesla.
The sequential drop in shipments can be mainly attributed to the increase in transit stocks, as Tesla shifted its delivery mix to Europe and China rather than to the United States. However, even taking this obstacle into account, it appears that the production and sales of Model 3 have peaked. The only hope of a return to meaningful growth is that Tesla's decision to open a factory in China will allow it to significantly reduce prices in this key market.
Tesla tried to put a positive image on the record by saying that model 3 orders in the United States far exceeded shipments in the first quarter. However, this is not as impressive as it may seem, as the majority of Model 3 shipments were made to foreign customers in the first quarter.
<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "InsideEV believes that Tesla delivered 22 425 Model 3s in the United States in the last quarter. (Tesla does not provide a country-by-country breakdown.) In other words, its return could allow only 30,000 US model 3 orders to be received in the first quarter. This would be a bad sign for the company as it plans to build nearly 100,000 models 3 per quarter at its Fremont, Calif. Plant, by the end of the year and as the United States have always accounted for the majority of Tesla's sales. "DataReact =" 35 "> InsideEVs estimates that Tesla delivered 22,425 models 3 to the US in the last quarter (Tesla does not provide country-by-country breakdowns.) In other words, the declaration of Tesla could only affect 30,000 models. In the United States, it would be a bad sign as it plans to build nearly 100,000 models 3 per quarter at its Fremont, Calif. Plant, by the end of this year. year and that the United States has always accounted for the majority of sales of Tesla.
A business figure for models S and X
While Model 3 is in the headlines these days, the S and X models accounted for a significant portion of Tesla's profitability in the second half of 2018. Indeed, the gross margin of these expensive models has reached about 30% during this period. As a result, the S and X models probably generated about half of Tesla's gross margin in the second half of the year, although they account for less than a third of its total shipments.
Unfortunately, Tesla only delivered 12,100 model S and X combined vehicles in the last quarter. This represented 27,550 a quarter earlier and 21,800 in the first quarter of 2018.
A silver Tesla Model S on a road, with hills in the background.
Shipments of the S and X models dropped in the last quarter. Source of the image: Tesla.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "There are several possible causes for these sales L & # 39; Partial elimination of federal tax credits in the United States may have led to some demand in 2018. A better availability of Model 3 could also weigh on demand for Teslas more expensive.Trade tensions could affect sales In China, the growing competition in the electric vehicle market certainly can not be ignored, and the recent unveiling of the Y model could be the source of some potential buyers. consider waiting for this model. "data-reactid =" 55 "> This drop in sales may have several causes: The partial elimination of federal tax credits in the United States may have led to some demand in 2018. The best availability of the model 3: Trade tensions could have an impact on sales in China Increasing competition in the electric vehicle market can not be ignored, and the recent unveiling of the Y model could push some potential buyers to wait. .
Yet, one thing is certain. There is no significant production constraint to blame for declining sales – everything is a matter of demand. The only question that arises is to what extent Tesla is willing to reduce its prices (at the price of a lower gross margin) to increase the sales volume of models S and X in the future .
2019 could be a difficult year for Tesla
Tesla noted that a significant number of deliveries had been transferred from the first to the second quarter due to difficulties encountered in attempting to significantly increase deliveries in Europe and China. This – along with the initial availability of Model 3 of $ 35,000 and a further reduction in the federal tax credit for Tesla's purchases on July 1 – should be sufficient to result in a sequential increase in Model 3 deliveries during the quarter.
However, it will be very difficult to reduce the outputs of the S and X models to the previous rate of about 25,000 deliveries per quarter. In addition, Tesla's project to accelerate the production of Model 3 during 2019 seems extremely unrealistic. The decrease in waiting times suggests that the demand may not even be sufficient to support the current production rate after Tesla has eliminated the backlog of initial demand in Europe and China.
Worse, the operational challenges and price reductions of Tesla, as well as the sharp drop in demand for the S and X models, will have serious consequences on the profitability and cash flow of the company in 2019. Some analysts They expect Tesla to burn more than a billion dollars this year, which would leave its balance sheet in a perilous state unless it succeeds in raising more capital.
Tesla bulls can expect new products like the Model Y, Tesla Semi and a future Tesla pickup truck to help make a difference. Yet, by the time these models arrive in 2020 and beyond, Tesla may be in a much weaker state than today – and face more intense competition than ever before.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " More from The Motley Fool "data-reactid =" 62 "> More from The Motley Fool
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Adam Levine-Weinberg has no position in any of the actions mentioned. The Motley Fool owns shares and recommends Tesla. The Motley Fool has a disclosure policy."data-reactid =" 70 ">Adam Levine-Weinberg has no position in the mentioned actions. The Motley Fool owns shares and recommends Tesla. Motley Fool has a disclosure policy.
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