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Tesla's First-Quarter Vehicle Deliveries Whiffed

Daniel Sparks, The Motley Fool

Electric-car maker Tesla (NASDAQ: TSLA) posted its vehicle production and delivery numbers for its first quarter of 2019 on Wednesday evening. Though first-quarter deliveries were expected to decline sequentially, they were much lower than expected -- primarily because of a sharp decrease in Model S and X deliveries.

However, Model 3 production ticked higher sequentially. Still, troubles with shipping vehicles overseas meant deliveries of the important vehicle were still well below what they were in the fourth quarter of 2018.

A red Tesla Model 3

Model 3. Image source: Tesla.

Here's a closer look.

Tesla's first-quarter production and deliveries

The automaker produced 77,100 vehicles during Q1, down from 86,555 in the fourth quarter of 2018. Production was significantly lower than expected. On average, analysts were expecting Tesla to produce 84,700 vehicles. 

Total deliveries came in at about 63,000 units, much lower than Tesla's nearly 91,000 deliveries in the fourth quarter of 2018 and about 12,000 less than analysts were expecting.

A bar chart of Tesla's quarterly vehicle deliveries by model

Data source: Tesla quarter shareholder letters and vehicle delivery updates. Chart by author.

The significant difference in production and deliveries during the quarter was the result of the company's challenges with bringing the Model 3 to overseas markets for the first time, Tesla explained in its update.

Due to a massive increase in deliveries in Europe and China, which at times exceeded 5x that of prior peak delivery levels, and many challenges encountered for the first time, we had only delivered half of the entire quarter's numbers by March 21, ten days before end of quarter. This caused a large number of vehicle deliveries to shift to the second quarter. At the end of the first quarter, approximately 10,600 vehicles were in transit to customers globally.

Model S and X deliveries were far worse than expected

Tesla's Model S and X -- not the newer Model 3 -- were the primary reason for the company's shortfall in production and deliveries. Tesla produced 14,150 combined Model S and X units and delivered 12,100 of them during the quarter. This is down from 25,161 produced and 27,607 delivered in Q4. 

Management had warned in its fourth-quarter shareholder letter in January that first-quarter Model S and X deliveries would be lower due to a pull-forward in demand in the U.S. as a result of the first scheduled reduction of the federal electric-vehicle tax credit for Tesla buyers on Jan. 1, 2019. But Tesla had said those deliveries would be only "slightly below 2018 levels," which were at 21,815 units. Instead, Model S and X deliveries fell sharply -- both year over year and sequentially.

Tesla Model X and S in a Tesla store

Model X (left) and S (right) in a Tesla store. Image source: The Motley Fool.

As this reduction of the federal electric-vehicle tax credit falls further into the past, investors should watch to see if Model S and X deliveries can return to levels seen in 2018. If they can't, Model 3 cannibalization could prove to be a real threat to the company's Model S and X sales, which have higher price tags and fatter profit margins.

Solid Model 3 deliveries

Model 3 production and deliveries actually fared well during the quarter. The company produced a record 62,950 Model 3 units, up from 61,394 in Q4. Deliveries, however, were 50,900 due to its challenges with getting vehicles to customers overseas.

Importantly, demand for Model 3 remains robust. Tesla said orders for the vehicle in the U.S. "significantly outpaced" Model 3 deliveries during the quarter. In addition, demand was strong enough for the company to reiterate its guidance for 360,000 to 400,000 deliveries in 2019 -- up from about 245,500 deliveries in 2018.

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Daniel Sparks owns shares of Tesla. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.