ii view: Wall Street unimpressed with latest Tesla deliveries

Third-quarter production to 30 September

• Deliveries of 462,890 vehicles in Q3, up from 443,956 in the previous quarter
• Total production of 469,796 vehicles, up from 410,831in 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, that marginally missed Wall Street forecasts.  

Third-quarter deliveries of 462,890 vehicles rose from 443,956 the previous quarter compared with analyst estimates of around 463,300. Deliveries year-over-year improved 6%.   

Shares in the Nasdaq 100 company fell 3% in post announcement US trading having come into this latest announcement up around 5% year-to-date. That’s better than a fall of around 17% for European car giant Volkswagen AG (XETRA:VOW) and fellow US EV maker Rivian Automotive Inc Class A (NASDAQ:RIVN), which has halved in 2024. The Nasdaq 100 index is up 18%.  

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Elon Musk's Tesla produces cars from two plants in the US, one in China and one in Germany. It previously flagged hopes to build a factory in Mexico where costs are lower.

Quarterly production of 469,796 vehicles to late September is up from 410,831 in the previous quarter, and up from 430,488 in the year ago quarter. Factory shutdowns due to shipping diversions, disruptions in the Red Sea and an arson attack at its Berlin plant have previously caused problems.

Discounts and incentives to aid vehicle sales during the second quarter had contributed to a reduction in Tesla’s operating profit margin to 14.4% from 18.7% in Q2 2023.

A marketing day is scheduled for 10 October. Third-quarter results are expected on 23 October. 

ii view:

US headquartered Tesla only makes electric powered vehicles. Automotive sales generated most of its 2023 revenue at almost 94%, with energy generation and storage systems the balance. Geographically, the US dominants at close to half of all sales, with China accounting for just over a fifth and other markets including the UK making up the balance. 

Tesla’s technological developments include self-driving software, a Robotaxi and even development of humanoid robots. Recent comments from Elon Musk regarding possible drone manufacture have also been made. Tesla’s stock market value of almost $800 billion compares to Ford Motor Co (NYSE:F), Volkswagen, Rivian and General Motors Co (NYSE:GM) all at under $100 billion.  

For investors, competitors such as GM and Ford are pushing EV models. Required infrastructure, such as charging points, and the pace of their rollout is arguably slow. Consumer concerns over battery life persist, borrowing costs to finance a vehicle purchase remain elevated, while an estimated price-to-net asset value (NAV) of around 13 times compares to estimates for rivals at under two times, suggesting the shares are not obviously cheap.

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More favourably, climate change concerns are not going away. Other product developments such as self-driving software and a Robotaxi might generate significant profits in the future. A doubling in energy generation and storage product sales during the second quarter are not to be overlooked, while innovative manufacturing and the geographical spread of its factories are all aimed at cutting production and shipping costs. 

For now, Tesla’s concentration on EV vehicles leaves it more focused than many rivals, with its vehicles still the biggest seller across the EV category in its home US market. Slow generation of profits from other product categories is a cause for concern, but Tesla will likely remain a popular stock among investors given obvious potential of the business and Musk's leadership.

Positives: 

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

Negatives:

• Rising competition from other manufacturers
• Potential regulatory hurdles for self-driving vehicles

The average rating of stock market analysts:

Strong hold