Tesla Misses Q4 Delivery Estimates: It Wasn’t Really an ‘Epic’ Quarter That Musk Touted

Yesterday, Tesla (NYSE: TSLA) released its fourth-quarter delivery and production report. The company’s deliveries fell short of Wall Street estimates.

Tesla produced 439,701 cars in the fourth quarter of 2022 which was a new record. Its deliveries hit 405,278 in the quarter which again was a record. The company’s deliveries rose 31.3% YoY in the quarter.

Looking at the full-year performance, TSLA delivered 1.31 million cars as compared to 936,172 cars in 2021.

Tesla missed Q4 delivery estimates

In 2022, Tesla delivered over 1 million cars for the first time. The milestone looks astonishing as the company delivered its millionth car in 2020 only. However, the 40% YoY delivery growth fell well short of the 50% growth that the company initially targeted.

Elon Musk had previously said that TSLA would deliver above 1.5 million cars in 2022. However, during the Q3 2022 earnings call, the company’s CFO Zach Kirkhorn said that delivery growth in 2022 would be below 50%.

Musk added that the company is still on track to achieve a long-term delivery CAGR of 50% and there would be years when delivery growth would be below 50%. He however added that in some years delivery growth would surpass 50% thereby bringing the CAGR to 50% or higher.

Wall Street analysts were expecting Tesla to deliver around 420,000 cars in the fourth quarter. Analysts had anyways downwardly revised their targets after the company’s Q3 2022 earnings call.

TSLA produced more cars than it delivered

Tesla produced 439,701 cars in the fourth quarter of 2022 which took its full-year production to 1.37 million. The company’s deliveries trailed production by a decent margin in the third quarter also. Back then the company said that it is working to improve logistics and the number of cars in transit increased during the quarter.

While releasing the Q4 delivery report, TSLA said, “We continued to transition towards a more even regional mix of vehicle builds which again led to a further increase in cars in transit at the end of the quarter.”

It added, “Thank you to all of our customers, employees, suppliers, shareholders and supporters who helped us achieve a great 2022 in light of significant COVID and supply chain related challenges throughout the year.”

Tesla faced COVID-19 disruptions in China

In the first half of the year, Tesla faced significant COVID-19 disruptions in China and its Q2 2022 deliveries fell on a sequential basis. It was the first quarter in two years that TSLA reported a fall in its quarterly deliveries.

Meanwhile, even as Tesla delivered a record number of cars in Q4 2022 it was not exactly an “epic quarter” as Musk predicted during the Q3 earnings call.

Musk has previously downplayed demand concerns and during the Q3 earnings call, he said, “I can’t emphasize enough, we have excellent demand for Q4, and we expect to sell every car that we make for as far in the future as we can see. So, the factories are running at full speed, and we’re delivering a recovery make and keeping operating margins strong.”

He emphasized, “we’re very pedal to the metal come rain or shine. So, we are not reducing our production in any meaningful way, recession or not recession.”

Tesla lowered car prices

Meanwhile, after the earnings release, Tesla took several measures that reflect that demand is probably not as strong. The company lowered car prices in China and offered other incentives in the country to spur sales.

It also temporarily suspended production in the country. While TSLA said that the shutdown was due to maintenance activity, it’s unusual for companies in China to shut plants ahead of the new year. Instead, companies do maintenance work during the Chinese Lunar New Year Holidays.

Even in the US which is Tesla’s largest market, the company said on its website that it would offer a $3,750 credit to buyers who take a Model 3/Y delivery in December. Subsequently, it increased the credit to $7,500 for US buyers and $5,000 for Canadian buyers.

While the credit might be due to the EV tax credit that Tesla cars would be eligible for from 2023, it also goes to show rising inventories and falling lead times.

Musk tried to support TSLA’s stock price

With a loss of 65% in 2022, TSLA stock had its worst-ever year. The company, which at its peak in 2021 was valued at $1.2 trillion is now worth around $385 billion. It lost a whopping $675 billion in market cap last year and was among the top five S&P 500 losers.

Musk has tried to support Tesla stock on multiple occasions. On December 31, he tweeted, “Long-term fundamentals are extremely strong. Short-term market madness is unpredictable.” Previously, he blamed Fed’s rate hikes for the slump in TSLA stock.

Some of the Tesla bulls like Dan Ives of Wedbush Research and Adam Jonas of Morgan Stanley also turned cautious on the stock after Musk acquired Twitter. Musk soon realized that his Twitter drama is adding fuel to the crash in Tesla stock and offered to step down from the company once he finds a CEO “foolish” enough to lead the company. However, his announcement failed to lift TSLA stock.

Musk said he won’t sell Tesla shares for two years

Musk has been gradually selling Tesla stock after previously having said that he was done selling. His frequent stock sales have also dampened market sentiments. Last month, Musk again said that he would not sell more shares until about 2025. However, markets were not too enthused with Musk’s assertion and the stock closed lower despite Musk saying he won’t sell any more shares for at least a couple of years.

Notably, Musk has made multiple U-turns over the last couple of years which makes markets apprehensive about his commitments.

During the Q3 2022 earnings call, Musk predicted that Tesla’s market cap would one day surpass the combined market caps of Apple and Saudi Aramco. After the recent crash in TSLA stock, the company’s market cap is now only about a tenth of the combined market caps of Apple and Aramco.