Update: Tesla’s official figures are out, and they’re lower than predicted in this article. Preceding the original article is Tesla’s press release about the Q1 figures.
PALO ALTO, Calif., April 03, 2019 (GLOBE NEWSWIRE) — In the first quarter, we produced approximately 77,100 total vehicles, consisting of 62,950 Model 3 and 14,150 Model S and X.
Deliveries were approximately 63,000 vehicles, which was 110% more than the same quarter last year, but 31% less than last quarter. This included approximately 50,900 Model 3 and 12,100 Model S and X.
Due to a massive increase in deliveries in Europe and China, which at times exceeded 5x that of prior peak delivery levels, and many challenges encountered for the first time, we had only delivered half of the entire quarter’s numbers by March 21, ten days before end of quarter. This caused a large number of vehicle deliveries to shift to the second quarter. At the end of the first quarter, approximately 10,600 vehicles were in transit to customers globally.
Because of the lower than expected delivery volumes and several pricing adjustments, we expect Q1 net income to be negatively impacted. Even so, we ended the quarter with sufficient cash on hand.
In North America, Model 3 was yet again the best-selling mid-sized premium sedan, selling 60% more units than the runner up. Inventory of Model 3 vehicles in North America remains exceptionally low, reaching about two weeks of supply at the end of Q1, compared to the industry average of 2–3 months.
Despite pull forward of demand from Q1 2019 into Q4 2018 due to the step down in the federal tax credit, US orders for Model 3 vehicles significantly outpaced what we were able to deliver in Q1. We reaffirm our prior guidance of 360,000 to 400,000 vehicle deliveries in 2019.
Given that Tesla vehicle production currently occurs entirely from one factory in the San Francisco Bay Area, but must be delivered to customers all around the world, production could be significantly higher than deliveries, as it was this quarter, when production exceeded deliveries by 22%.
We’ve just begun the global expansion of Model 3, and we want to thank our employees for their hard work and our customers for supporting our mission. We are doing everything we can to deliver cars globally as quickly as possible and look forward to continuing to scale deliveries throughout the year.
It’s time for quarterly Tesla production and delivery numbers — or almost time for them. But don’t mistake either of these for sales.
The difference between sales and deliveries explained
First, let’s clear up this misunderstanding, or perhaps a “FUD tactic,” about the difference between deliveries and sales.
In marketing, a sale is getting the contract or order signed. That is the important part for the seller and is the indication of the popularity of the product or service. Dropping sales is dropping demand, and a dire warning about a product future.
A delivery is the handover of the sold product or service. Often at the same time as the payment is transferred in the other direction. It makes it all final and is important for accountants and such. It is directed by planning, production, logistics, stock (inventory), or other random influences and does not tell us anything about demand and the status of the product.
Tesla’s main business model is still “build to order,” not build to stock.
The other big difference between Tesla and all other carmakers is that Tesla is a retail car seller, and all the others are wholesale car sellers.
Any analysis that compares Tesla to other brands and does not pay attention to these two facts is likely producing FUD or written by an amateurish Wall Streeter.
Having that off my chest, and waiting for the Tesla press release, I can now rant about the questionable predictions by some analysts with a large media presence.
Ranting about my favorite topic to get my blood boiling
Teslarati mentions Spak: “Spak trimmed his Q1 2019 Model 3 delivery forecasts to 52,500. This number is 4,500 less than Spak’s previous estimates over what he cited as ‘meager demand’ for the electric sedan.”
SeekingAlpha’s own Anton Wahlman has an excellent looking analysis with all the numbers for all the models and markets. He comes to this conclusion: “The total quarterly unit estimate now stands at 60,828, which would be down 33% from Tesla’s Q4 2018 unit sales number of 90,966.”
CNBC publishes this gem: “Analyst Jeff Osborne is lowering his Model 3 delivery forecast from 55,000 to 47,500. He also lowered his Model S and Model X delivery forecast from 21,500 to 18,000.”
What is wrong with these people?
Spak writes about “meager demand” at the same time that Tesla can’t start producing the Model 3 Standard Range because of overwhelming demand for the Standard Range+. Not having the production capacity to fulfill orders does not point to “meager demand” in my book.
Reading Anton Wahlman’s article, I got a deep respect for the many numbers he collected. That is something he is really good at. Until at the end there were 3,000 deliveries for Model 3 in March in China. When 8 boats deliver about 3,000 cars each, thinking that over 20,000 will be in storage because of a hiccup with a window sticker is naïve. Anton, you can do better, even if it destroys your bear thesis.
What prompted Jeff Osborne to lower his forecasts is a mystery to me. Probably because others did it, he felt compelled to make some similar noises.
Logic applied to production and sale forecasts
OK, it is hard to predict Tesla production and sales. We have the benefit of Tesla’s guidance in the update letter. We have the Bloomberg Model 3 tracker. We have past performance. If that is not enough, we have insideEVs.com and Jose Pontes to monitor the markets. There are even some markets that we can follow with hourly or daily updates. Yep, an overload of information can be confusing.
First, let’s make a production forecast.
Bloomberg has been pointing to production of 80,000 Model 3’s this quarter for weeks. But as they say themselves, it might be too optimistic this quarter. So, I am using 75,000 for a low estimate and 80,000 for a high one.
Model S & X have been at 25,000 per quarter for a few years. Some quarters a bit more, others a bit less. It depends on demand, logistics, and planning. Again, conservatively, I’ve got 20,000 for a low estimate and 25,000 for a high one. The guidance from Tesla was not optimistic, so no Q3 or Q4 numbers.
This gives a clear lower bound of 95,000 and an upper bound of 105,000 for total production this quarter. If there were problems with S & X or Bloomberg was really off, it could be as low as 90,000. See, I do it too. Everybody is talking about low production, so I also start covering my ass.
Forecast 1: production between 95,000 and 105,000 based on logic and trusting Tesla.
Next comes the forecast for deliveries.
This is a whole lot harder. There are absolutely some vehicles still “in transit” in Europe and China. The logistics infrastructure was not really prepared to deliver such high numbers of cars. The last ships were really late in the harbors, and the numbers delivered in the last days of March were very impressive. That points to not delivering 100% before the end of the quarter. I am willing to use 10,000 in transit as the number for the export markets.
In the USA, it takes more than a week to reach the East Coast for cars produced in Fremont. A week’s worth of production is ~8,000 cars. So, I use 8,000 as the USA’s in-transit number.
That leaves us with the numbers in stock, or “on the dealer’s lot” as is the habit to call the stock in the USA. With the end-of-quarter rush — selling everything and the kitchen sink — I refuse to go higher than 2,000.
That leaves 20,000 not delivered. The Tesla guidance for “in transit” was 10,000 for the end of Q1.
Combining the highest not delivered with the lowest production estimate (95,000 − 20,000) gives 75,000 deliveries for Q1.
Combining the lowest not delivered with the highest production estimate (105,000 − 10,000) gives 95,000 deliveries for Q1.
Those optimistic numbers never pan out, though. My gut feeling is for 80,000 to 85,000 deliveries in Q1.
Forecast 2: delivery between 80,000 and 85,000 based on logic and my gut.
In a few hours, we should know what the reality is. Be ready for the update.
With thanks to Vijay Govindan for providing many links to end-of-quarter estimates that were not as good as they should be. (Or were excellent but not recognized as such by me.)
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