What is Tesla’s inventory and backlog now? If it is rising, is that by design, intentional? I look at that and more in this piece.
I’m writing this article on July 1st, before Tesla has announced its second quarter production and delivery numbers. My expectations are that Tesla will meet the expectations on both and make about 20,000 more vehicles than it sells. I expect that the company will continue to smooth out deliveries compared to its previous practice of delivering little in the first part of the quarter and then spending a lot of resources to delivery many cars in the last month of every quarter. This is known as the “wave,” and normalizing the deliveries is known as “unwinding the wave.”
End-Of-Quarter Channel Check, Lots Of Cars Available In The US
I stopped at the local Tesla showroom yesterday and there wasn’t a single person there (until I was leaving and someone showed up for a test drive). That is markedly different from when I was there at the end of the first quarter, when it was a zoo of 40 people or so working with sales advisors to order or pick up a car.
As my friend Dennis says in the above video (a great channel to subscribe to if you want the latest info on whether it is the best time to buy or for tips on financing), Tesla put many or all of its demos on sale at the end of quarter. In the past, the discounts on the demo and inventory vehicles was enough that Tesla would usually sell out in most US markets (there would still be inventory traveling, but pretty much all the inventory that was ready to sell would be sold).
The inventory trackers don’t seem to be working too well, unfortunately. I think Tesla changed the API to make their job more difficult. For example, WaitingForTesla.com shows 83 new Model 3s available and one in Florida, but Tesla.com shows 48 Model 3s within 200 miles of my home in Tampa (200 miles from Tampa covers most of Florida’s big cities except the panhandle, which doesn’t seem to have any Tesla inventory anyway). EV-CPO.com is similar but different. It shows 175 Model 3 vehicles in the US, but I counted close to a 100 just in California, in addition to the 48 in Florida and nearly 50 in Texas. Additionally, if Tesla has multiples of the same configuration, it generally doesn’t show that on its website.
Tesla-Info.com seems to be working better, showing 663 Model 3 vehicles at this time.
What About Backlog?
If there is inventory of your cars, why would you have a backlog? Well, there might be inventory of some models, but not of others, or their might not be inventory in the exterior or interior color you want. Or you might want the 7-seat option in the Model Y. So, unless Tesla keeps a LOT of inventory, there will likely still be the option to custom build the car for your order.
Hi everybody. Based on my calculation, Tesla's order backlog was 59K units on June 19, down from 75K on May 31.
— Troy Teslike (@TroyTeslike) July 1, 2023
According to Troy, there is still backlog, but a lot less of it than there used to be. A year ago, he estimated almost 200,000 in the US, and now he estimates fewer than 20,000. Considering his estimates of Tesla US sales being a little below 2,000 vehicles a day, that puts us at about a little over one day’s worth of inventory available for sale and about 10 days backlog. That seems like a very balanced and efficient situation versus the traditional auto industry’s convention of keeping 60 days of inventory at dealer lots.
Amy’s Twitter Reaction To My Concern Over Inventory
Why would I talk about inventory? I never have, IMO it is in unimportant metric. Thanks for the chance to refute possible FUD.
Tesla’s Model Y was Number one in Q123! Demand is fine. The macro environment not so fine, but better than I feared it would be right now. Tesla is…
— Amy (@SF___Tahoe) July 1, 2023
Amy is an increasing well known long-term Tesla investor. I tweeted, tagging her as well as CleanTechnica‘s Zach Shahan and Kyle Field as well as a couple of others, that it looked like inventory is increasing and that could be a sign of soft demand. Amy countered that she doesn’t look at inventory and that metric isn’t important and then gave several valid reasons why that is the case, including:
- Model Y is the top selling car in the world.
- The macro environment is soft.
- Tesla is financially strong.
- Tesla is focused on 50% year-over-year growth over the long run, but not managing to quarterly or even yearly results.
- Tesla is “unwinding the wave.”
- Tesla is doing a lot of other cool stuff.
While I agree with everything she said, and after putting this inventory expansion into perspective, I agree it isn’t a concern for long-term investors and not even a major concern for short-term investors, I do disagree with her on two points.
- Even though I think Amy is right in this case that inventory is fine, it is wise to keep an eye on it because it could get out of control in the future. You can look at inventory without freaking out about it like a Tesla bear. I always like to listen to the Tesla bears, since although what they say is frequently nonsense, it sometimes has a shred of truth.
- Not all Tesla investors are as wise as Amy, and if you are more of a short-term trader, be aware that some people will overreact to increasing inventory, expecting that means we have soft demand, since they either don’t do the analysis we did here or don’t consider the other factors Amy brought up.
Maybe Having Retail Inventory Is Intentional
Maybe Tesla has done some market research and determined that although most early adopters are comfortable custom ordering a car and waiting months or years for that car to be built for them, the mainstream buyer in the US (I really don’t know about other countries) isn’t yet ready to fully embrace ordering a car versus buying a car off a lot. If Tesla wants to expand from selling a little over 1.3 million cars worldwide (last year) to 20 million by 2030, it needs to move into the mainstream market. Much has been written that Tesla needs a $25,000 car or Model 2 or Next Generation, but it isn’t just the vehicle that might need to change to reach those numbers — the way Tesla sells and delivers vehicles might need to change a bit. Tesla might need to keep a few or a even a lot of cars in stock locally or maybe regionally to support buyers who need a car on little notice. Even though this list of reasons people buy a new car are all long-term reasons that don’t require a vehicle today, they forgot to mention two common reasons that have caused me to buy a car in the past:
- An accident totaled your car and you need to replace it.
- A big repair made your old car undrivable and it isn’t worth it to fix it.
If both of these reasons, you might want to buy a Tesla, but you wouldn’t be able to do so if it had a long backlog — since you need a car immediately, or at least in a few days.
I think it is wise to keep an eye on inventory and consider all available information before investing in Tesla or any other stock. After looking at everything, I think the inventory increase and backlog decrease is fine in the long run, but might cause the stock to drop a bit in the short run.
If you want to take advantage of my Tesla referral link to get Reward Credits, here’s the code: https://ts.la/paul92237 — but as I have said before, if another owner helped you more, please use their link instead of mine. If you want to learn more about Tesla’s new referral program, Chris Boylan has written an excellent article on it.
Disclosure: I am a shareholder in Tesla [TSLA], BYD [BYDDY], Nio [NIO], XPeng [XPEV], Hertz [HTZ], and several ARK ETFs. But I offer no investment advice of any sort here.
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