Tesla Q1 Deliveries Rise to Record High but Fall Short of Estimates

Tesla (NYSE: TSLA) reported its deliveries for the first quarter of 2023 yesterday. While the company’s deliveries rose to a new record they fell short of what the market was expecting.

Tesla produced 440,808 cars in the first quarter and delivered 422,875 of these. While production rose 44% deliveries rose only 36% YoY. For the last many quarters, Tesla’s deliveries have trailed production.

Tesla missed Q1 2023 deliveries

Importantly, the deliveries of Model S/X were only 10,995—which is way below the 19,437 that it produced. The share of Model S/X in Tesla’s sales mix has anyways been on a downward trajectory and in Q1 2023, accounted for only about 2.5% of the total deliveries.

Last year, Tesla produced 1.37 million cars but could only deliver 1.31 million of these. The company missed 2022 delivery estimates, but so did most EV companies including Rivian.

In its prepared remarks, Tesla said, “We continued to transition towards a more even regional mix of vehicle builds, including Model S/X vehicles in transit to EMEA and APAC.”

The company used similar language when it released its Q4 2022 delivery report.

Tesla expects to produce 1.8 million cars in 2023

During the Q4 2022 earnings call, Tesla said that it expects to produce 1.8 million cars in 2023 which is a YoY growth of just around 31%. During the earnings call, Tesla’s CEO Elon Musk said that while its internal production goal is 2 million cars, it is providing conservative guidance.

He said,” I don’t know, there just always seems to be some freaking force majeure thing that happens somewhere on earth. And we don’t control if there’s like earthquakes, tsunamis, wars, pandemics, et cetera.”

Tesla misses delivery estimates for yet another quarter

Coming back to Tesla’s Q1 2023 delivery report, analysts expected the metric to be around 430,000. It would mean that the Elon Musk-run company has missed delivery estimates for the third consecutive quarter.

Markets were keenly awaiting Tesla’s Q1 2023 delivery report to gauge the impact of price cuts on its sales. Earlier this year, Tesla slashed prices across markets including the US and China.

The company’s price cuts have raised fears of a price war and are also expected to be a drag on its profit margins. Tesla’s gross margins fell in the fourth quarter and analysts expect margins to contract further in the first quarter.

Also, the price cuts have led to apprehensions that demand for Tesla cars is slowing down.

Musk sees no demand issue for TSLA cars

Musk tried to address the issue and began the Q4 2022 earnings call by addressing the demand question and he said he wants to “put that concern to rest.”

He added, “Thus far in January, we’ve seen the strongest orders year-to-date than ever in our history. We currently are seeing orders at almost twice the rate of production. So, I mean that — it’s hard to say whether that will continue twice the rate of production, but the orders are high. And we’ve actually raised the Model Y price a little bit in response to that.”

During the investor day last month, Tesla’s global production head Tom Zhu said, “As long as you offer a product with value at affordable price you don’t have to worry about demand.” Musk also echoed similar views and said, “Demand is a function of affordability not desire.”

Musk is targeting a 20 million production capacity

Tesla has set itself a target of producing 20 million cars annually by 2030. To put that in perspective, Toyota, the world’s largest automaker, sold just over 10 million cars in 2022. Tesla expects to produce around 1.8 million cars in 2023 and said that it has the capacity to produce as many as 2 million cars.

To achieve the goal of 20 million deliveries, which amounts to a CAGR of over 41% between 2023 and 2030, Tesla might need to build many more Gigafactories. In the past, Musk said that the company would need over a dozen Gigafactories to reach that goal.

Currently, it has four plants of which two, Berlin and Austin, are in the process of ramping up production and has announced another Gigafactory in Mexico.

EV competition is rising

The competition in the EV industry is rising and last month Volkswagen unveiled the ID. 2all with a starting price of around $26,600 and a range of 279 miles. The company has stepped up its game and recently announced a nearly $200 billion investment, two-thirds of which would go towards tech and electric vehicles.

Volkswagen is the market leader in the European EV market and has set itself a target of capturing around 10% of the US market share by 2030 which is over twice its current market share.

In the US, Tesla now has around 5% market share of the total automotive market which is higher than Volkswagen. When it comes to EVs, it is the largest seller by a fairly wide margin and Ford is a distant second.

Musk says TSLA would become the largest company

During Tesla’s Q4 2022 earnings call, Musk said that he is “convinced” that Tesla would one day become the most valuable company globally. 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.

Musk flaunted manufacturing prowess as its real competitive strength. He added that the company is developing other products also. He however said, “We’re not going to announce them, obviously, but they’re very exciting. And I think it will blow people’s minds when they — when we reveal them.”

Musk never shies away from such exorbitant claims. Recently, he slashed Twitter’s valuation by over half to $20 billion but predicted that the social media company’s valuation can rise 12-fold to $250 billion.

That said, to his credit, under Musk’s watch Tesla has become the most valued automaker globally, and in 2021 its market cap surpassed $1.2 trillion.

It not only became the first automaker to have a market cap in excess of $1 trillion but at that time Tesla’s market cap was ahead of the combined market cap of all leading automakers.

Despite having fallen by almost half from the peak, Tesla’s current market cap is over thrice that of Toyota.