While the financial media and analysts continue to question Tesla’s demand on the basis of one unusually “bad” quarter, quarterly data and internal Tesla emails show worldwide order rates are actually up 25% in Q2 versus Q1. Meanwhile, a crowdsourced Tesla order tracker shows US and Canada Model 3 orders are up 116% versus Q1, and website traffic and interest data show that interest in Tesla’s vehicles is higher than in the past.
These data points are especially significant as the stock hits 3-year lows mostly due to speculation about soft demand, resulting in the stock price divorcing from reality for a company whose demand is actually very healthy. Many powerful and influential actors stand to profit from the declining stock price, which directly affects Tesla’s employees’ compensation and Tesla’s ability to raise capital to fund its vision of a sustainable future.
The worldwide order data for the second quarter comes from Elon Musk’s recently leaked internal email, in which he told employees that Tesla has over 50,000 new orders net of cancellations from April 1–May 21. This represents an order rate of about 980 cars per day for all three models (S/3/X) worldwide. This number was underreported in the news about Tesla, partially because it doesn’t fit with analysts and media commentators claiming soft demand, and partially because the number isn’t directly comparable to any other number.
However, it is possible to estimate Tesla’s orders for previous quarters simply due to the way it reports its production and deliveries.
Tesla reports how many cars were delivered and how many were in transit to customers. Cars in transit are defined as ordered cars that have been built and are currently being shipped to a customer. In most recent quarters, Tesla builds the bulk of its cars at the same time or even before the car is ordered, and then assigns the car to a buyer after it leaves the factory. That means that one could calculate the orders in a particular quarter by starting with deliveries in that quarter (in order for a car to be delivered, it must be ordered), and subtracting in-transit cars from the previous quarter (in-transit means the car was already ordered last quarter), and then adding back the in-transit cars from the quarter of interest (which had to have been ordered in that quarter). Finally, we divide by the number of days in the quarter to see the daily order rate.
For example, in Q1, Tesla entered the quarter with 2,907 cars in transit from Q4, delivered 63,000 cars, and had 10,600 cars in transit to customers at the end of the quarter. This implies 70,693 orders in the first quarter over 90 days, or 785 orders per day.
With 980 orders per day in Q2 so far, according to the leaked internal email, that is a 25% increase over the 785 order per day rate in Q1. This methodology for calculating orders is adopted from twitter user @vgrinshpun.
Rate of ships leaving Pier 80 in Q2 is approx = Q1
Rate of orders in Q2 per Elon email is approx 25% > than Q1
The split of NA/RoW deliveries in Q1 was roughly 50%-50%
Based on the above NA orders in Q2 are trending 50% > than in Q1
Demand cliff is actually just a dip $TSLA pic.twitter.com/ZqgGHq3WML
— Vladimir Grinshpun (@VGrinshpun) May 27, 2019
I would note that this methodology will be flawed and actually overestimate orders for quarters in which Tesla started with a significant backlog of orders (a backlog implies some cars have been ordered but not yet built and therefore not captured in the in-transit numbers). However, Q1 2019 is not such a quarter since there was virtually no backlog from the fourth quarter when Tesla pulled out all the stops to deliver as many vehicles worldwide as possible, including in the largest market, the US, before the first step in the tax credit phaseout. It is also discernible from the short wait times for Tesla’s cars that there has not been significant backlog this year. Q4 2018 and Q3 2018 might have had significant backlogs at the beginning of the quarters, so it is likely that this methodology will overstate the number of orders in the quarter, which in fact makes the Q2 order number look even stronger when comparing to those quarters.
There is even more evidence for significantly increased orders in the second quarter versus the first for US and Canada, according to a crowdsourced spreadsheet that tracks orders and deliveries and samples around 1% of all orders per quarter. It is worth noting that participation rates in this spreadsheet decline over time, so the underlying order rate might be the same between two quarters even when the spreadsheet shows a decline in the orders. Despite this slight flaw that makes order rates in more recent quarters appear lower than previous quarters, average daily order rates in Q2 are up 116% versus Q1 in the US and Canada.
Finally, the last piece of data that corroborates Tesla’s increasing demand story is the increasing website traffic, website engagement, website time spent, and overall search interest data from Alexa.com and Google Trends. Discussions of this have been published on both CleanTechnica and Seeking Alpha.
All the available data points to increasing demand for Tesla’s cars, not softening demand as financial media and some analysts often suggest. The takeaway from this is that financial media and analysts often speculate and do not necessarily update their speculations when hard data comes out, leaving everyone else to do their own homework or wait until official data is released to come to conclusions. Another side effect is that Tesla’s stock keeps falling due to speculation about soft demand when the reality is the opposite. Most people would call this an opportunity.