ii view: Tesla vehicle deliveries miss Wall Street estimates

First-quarter production update

• Deliveries of 386,810 vehicles, down from 484,507 in the previous quarter
• Total production of 433,371 vehicles, down from 494,898 in the previous quarter

ii round-up:

Electric vehicle (EV) maker Tesla Inc (NASDAQ:TSLA) detailed quarterly vehicle deliveries, the nearest number it gives to sales, which missed Wall Street forecasts. 

First quarter deliveries of 386,810 vehicles fell from 484,507 in the previous quarter, comfortably short of analyst estimates nearer to 443,000. Deliveries year-over-year declined 9%, the first annual fall since the start of the pandemic in the second quarter of 2020. 

Shares for the Nasdaq 100 company fell 5% in US trading following the announcement. That leaves them down by around a third year-to-date having doubled during 2023. Shares for smaller EV rival Rivian Automotive Inc Class A (NASDAQ:RIVN) have fallen by 55% during 2024, while shares for General Motors Co (NYSE:GM) and Volkswagen AG (XETRA:VOW) are each up by around a quarter.  

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Tesla’s first quarter production of 433,371 vehicles fell from the previous quarter’s 494,898 with management flagging factory shutdowns due to shipping diversions caused by the Red Sea conflict and an arson attack at its Berlin plant. 

Changes across its factories made to increase output of its updated model 3 vehicle at its US Fremont, California facility, also fed into the production retreat. 

Elsewhere, deliveries of its energy generation and storage products, which accounted for 6% of overall 2023 revenues, totalled 4053 megawatts, up 27% from the previous quarter and up 4% year-over-year. 

First-quarter results are scheduled for 23 April. 

ii view:

Tesla makes both electric vehicles and energy generation and storage systems with its stock market value of around $530 billion comparing to rivals such as Mercedes at $78 billion and Ford at $53 billion. Tesla’s technological developments include its self-driving software and the expected use of Artificial Intelligence or AI, along with potentially radical new production techniques to reduce costs. Geographically, the US accounted for its biggest slug of revenues during 2023 at almost 47%, followed by China at just under 23%, with other markets combined and including the UK at 31%. 

For investors, intense competition in China from the nation’s own vehicle makers such as BYD and Xiaomi is pressuring sales, as is competition elsewhere from other more traditional car makers such as Bayerische Motoren Werke AG (XETRA:BMW). Elevated borrowing costs to finance a vehicle purchase should not be ignored.

In addition, chief executive Elon Musk’s own high media profile and opinions could be deterring some buyers, while an estimated price to Net Asset Value (NAV) of around 8 times compares to estimates for rivals at under two times, suggesting the shares are not obviously cheap.

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More favourably, Tesla’s development of vehicle software and network of supercharging stations continues. Climate change concerns are not going away. The geographical spread of its factories including its relatively new German plant has reduced shipping costs. Production of its high tech Cybertruck is expected to ramp-up during 2024, while sales for its energy generation and storage business offer added potential.  

On balance, and whilst growing competition offers room for caution, existing long-term fans of this innovative EV-maker are likely to ride out current bumps in the road. 

Positives: 

• Climate change concerns persist
• Expanding network of superfast charging stations

Negatives:

• Rising competition from other manufacturers
• Elevated costs

The average rating of stock market analysts:

Hold