Tesla Motors reported both Q3-2019 vehicle production and delivery performance for the recent quarter. While the electric automaker delivered a record number of vehicles, Wall Street interests are growing increasingly skeptical that the company can meet its full-year operational performance targets.

According to The Wall Street Journal, the company’s stock has declined 23 percent over the past year. Tesla Model 3

Total production in Q3 amounted to 96,155 vehicles while total deliveries were reported as 97,000 vehicles. Recall that with Tesla, deliveries have often lagged production because of in-vehicle transit and customer delivery needs, especially to global markets.  This past quarter’s delivery performance, however, is showing some improvement given that in the prior quarter, 95,200 vehicles were reportedly delivered. However, Tesla elected to suspend the deliveries-in-transit number going forward, thus it is difficult to really assess what overall progress has been made in delivery logistics.

Regarding the closely watched Model 3 sedan, production performance, the latest quarter reflected 79,837 Model 3’s off the assembly line an overall increase of 2000 vehicles from that of the prior quarter.

In Q2, CEO Elon Musk reiterated prior guidance that the auto maker would deliver 360,000 to 400,000 vehicles in 2019. With Q3’s reported performance, the automaker is over 104,000 vehicles short of reaching the low-end of that full-year production guidance.

As noted in prior Supply Chain Matters commentaries, Tesla’s vehicle delivery forecast has lost creditability, and the 2019 output goal remains in reach but still dauting. Current Model 3 production remains augmented by an assembly line housed in a tent in the company’s campus parking lot.

According to this week’s reporting by The Wall Street Journal, equity analysts are becoming increasingly concerned with the lower performance of the higher-margin Model S and Model Y production. Deliveries in this latest quarter slipped 37 percent from the year-earlier period. Increasing competitive pressure from other automakers such as Porsche and other new premium models scheduled for 2020 market delivery may be impacting current sales.

Also, as we noted in our prior Tesla Motors focused commentary, the automaker began re-configurating its Fremont California production lines in September to prepare for new Model S refresh and Model Y SUV market delivery needs.  That may likely impact the overall Q4 production performance in the high-end category.

Equity analyst concerns further extend to the sales pipeline of the Model 3 in the U.S. as well as in China, where sales of electric vehicles models overall have shown noticeable declines.

Tesla’s new Shanghai production facilities are scheduled to be online in early 2020. The goal here was to avoid U.S. export tariffs but with the ongoing U.S. and China trade tensions continuing to escalate, Tesla needs to be very watchful in the coming months, including that the auto maker does not become entangled in the ongoing conflict.  Risks could either be in steeped-up government oversight, a sudden revisit of Tesla’s special status as a solely owned foreign manufacturer, or new regulatory hurdles regarding the sale of electric cars from overseas based manufacturers.

 

Reader Takeaway

Our takeaway is that Tesla’s manufacturing and supply chain management teams will remain pressured to meet or exceed Q4 operational performance goals. When the company reports its Q3 financial performance in several weeks, such goals will likely be further quantified. Analysts and investors are becoming increasingly concerned and the electric vehicle market is exhibiting changing competitive dynamics.

The company’s near-term fortunes still remain in meeting Model 3 sales, operational and margin performance.

 

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