Tesla Deliveries: Organic Demand Is Intact

Tesla Deliveries: Organic Demand Is Intact

Tesla announced Q3 production and delivery numbers, reporting an all-time record of 97,000 vehicles delivered. The company delivered 79,600 Model 3s (production of 79,837) and 17,400 S&X vehicles (production of  16,318).

Tesla shares, however, are down 4% on this news, as the company’s habit of setting high expectations again dampened good news. Last week, an internal email written by Elon Musk was leaked. In the email, Musk indicated that Tesla had a shot at their first-ever 100k vehicle delivery quarter, raising investor expectations.

The optics of the announcement may have been diluted, but the substance was impressive. Tesla built and sold a record number of vehicles in Q3. Deliveries were up 16% y/y on a tough comp from Q3 of 2018 when deliveries more than doubled sequentially to 83k. In the update letter, the company said that they achieved record net orders and that nearly all of those orders came from people without previous reservations. In other words, all signs point to the fact that organic demand, which is the crux of the bull/bear debate, is intact.

As a reminder, Tesla’s guidance calls for 360k-400k deliveries in 2019. This quarter pushed the 2019 total to 255,370, which means they must deliver 104,630 vehicles in Q4 to meet the low end of guidance. A 100k+ deliveries in Q4 would represent a major milestone for the company and a 45% y/y increase. In other words, hitting even the low end of 2019 guidance would be a big win for a company that struggles to properly set expectations.