Tesla Shares Dip as Vehicle Deliveries Fall Short in Q3

Tesla shares have fallen on news that the electric automaker failed to meet its target for vehicle deliveries in the third quarter.

Deliveries of Tesla vehicles fell short despite setting a new record.

Tesla revealed the figures in a report published by the company over the weekend.

The electric vehicle (EV) company said it requires a further boost in sales in the last quarter of 2022 to meet its annual growth target for the year.

Production and delivery numbers fell short of the projected 364,660 delivery goal for the three-month period ending in September.

At the end of trading on Monday, shares of Tesla fell 8.6 percent following the report.

Tesla announced the delivery of only 343,830 vehicles in the third quarter, but this was still an improvement over the 255,000 delivered in the second quarter.

Telsa fell short in Q2 after a key factory in Shanghai was temporally shut down in July.

The Shanghai factory was reopened in August, enabling production and deliveries to rebound, according to China Passenger Car Association data.

Total deliveries were about 42 percent higher compared to the third quarter of 2021 when Tesla delivered over 241,000 vehicles.

At least 345,988 electric vehicles were produced during that three-month time frame, according to estimates compiled by FactSet-owned Street Account, according to The Wall Street Journal.

The EV maker said it produced 19,935 of its high-end Model S and Model X vehicles, and 345,988 of its more popular Model 3 and Model Y vehicles during the quarter.

The Model 3 and Model Y accounted for almost 95 percent of deliveries.

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There also appears to be a widening spread between sales and production of its vehicles, due to transit delays between China and Europe.

Vehicles in transit do not count as deliveries until they reach the hands of customers.

Tesla also makes the Model S and Model X cars at its main U.S. factory in Fremont, California.

The new EV factory in Austin, Texas, finally hit its production milestone of 1,000 cars per week in August, while the new Gigafactory in Reno, Nevada, hit new records, CNBC reported.

The carmaker opened its first European factory in Germany in March after facing serious delays due to environmental fears by the local authorities.

CEO Elon Musk told the press this weekend that plant output in Berlin had finally hit 2,000 Model Ys produced.

Tesla has also been facing issues at its new factories in Germany and Texas, along with executive resignations, energy shortages, permit conflicts, and rising commodity prices.

The most notable departure was Tesla’s artificial intelligence (AI) chief, Andrej Karpathy, who left the company in July after five years.

The entire staff of the team developing the company’s autopilot feature was also laid off, among other staff cuts.

Record shipping costs have been hitting the auto industry since the pandemic, along with shortages of semiconductors and other components, while the war in Ukraine has compounded these issues.

“Customer experience suffers when there is an end of quarter rush. Steady as she goes is the right move,” Musk said in a tweet.

Musk’s company blamed the shortfall on changes being made to its overall system, which, according to Tesla’s report, “led to an increase in cars in transit at the end of the quarter.”

Tesla said it was adjusting its delivery systems in order to keep up with expanding production volumes, as vehicle transportation capacity became increasingly “challenging to secure” for a reasonable price toward the end of the last quarter when EV shipments normally rise.

“Smoothing out crazy end of quarter delivery wave to reduce expedite costs & relieve stress on Tesla team,” said Musk in a tweet.

“Aiming for steadier deliveries intra-quarter.”

The lower-than-expected rebound in deliveries has caused concern among some investors that demand for Tesla’s cars may be softening amid global recession fears and additional competition in the EV market.

Tesla has a long-term goal to boost vehicle output by an average of 50 per year, despite recent production and supply disruptions.

The EV giant would need to deliver a record-setting 495,000 vehicles in the fourth quarter at 40,000 vehicles a week to reach that goal.

Investors are concerned that Tesla will struggle to reach its annual goal of 1.4 million deliveries, while projecting a 38,000 vehicle shortfall below its fourth-quarter target, according to The Wall Street Journal.

Tesla admitted in a July conference call that the company could have produced about 1.9 million vehicles this year over a 12-month period, but it was constrained by supply-chain challenges.

Musk told Tesla shareholders in August that the company will have to expand by roughly a dozen factories to reach its goal of selling 20 million vehicles annually worldwide by 2030, according to The Wall Street Journal.

“I think inflation is going to drop rapidly,” Musk predicted at the August meeting, envisioning a rosier economic outlook compared to many of his peers.

He said that since Tesla purchases its supplies months ahead of time, it can see where prices are headed.

“The interesting thing that we’re seeing now is that most of our commodities, most of the things that go into a Tesla—not all but more than half—the prices are trending down in six months,” he said.

There has been strong encouragement by Western leaders to boost the output of EVs amid high fuel prices and to meet “green energy” goals.

This has led Tesla and its competitors in the EV market to strongly expand their production targets in anticipation of rising sales.

President Joe Biden’s Inflation Reduction Act includes incentives for Americans to buy EVs and for car makers to manufacture them domestically.

Tesla’s quarterly results are scheduled for Oct. 19, while the company shares are down about 25 percent this year to date.

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By Nick R. Hamilton

Nick has a broad background in journalism, business, and technology. He covers news on cryptocurrency, traditional assets, and economic markets.

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