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Tesla churns out record number of cars in Q3, but fails to crack 100K

Tesla (TSLA) said on Wednesday that it cranked out a record number of vehicles in the third quarter, underscoring the recent success of efforts to boost international deliveries and incentivize customers to purchase the electric vehicles.

The Palo Alto, California-based company delivered 97,000 cars in the three months ending in September, topping a previous all-time high hit during the quarter prior. This comprised 79,600 deliveries for Tesla’s biggest-selling Model 3 sedans, as well as 17,400 combined deliveries for Tesla’s Model S and Model X SUVs. Production totaled 96,155 vehicles, compared to the 87,048 Tesla produced in the second quarter.

Ahead of results, Wall Street analysts were largely anticipating between 95,000 to 100,000 deliveries for the quarter.

Shares of Tesla fell more than 5% after hours as of 4:56 p.m. ET, reflecting investors’ disappointment that production failed to clear the top range of estimates.

Ahead of official results, Tesla CEO Elon Musk said in a company-wide email that the company had “a shot” at delivering more than 100,000 vehicles during the quarter, Electrek first reported last week. The publication had also reported that Tesla was allowing its sales team to offer discounts and other incentives like free Supercharging to help boost deliveries through the end of the quarter.

NEW YORK, NY - JULY 05:  A Tesla model S sits parked in a new Tesla showroom and service center in Red Hook, Brooklyn on July 5, 2016 in New York City. The electric car company and its CEO and founder Elon Musk have come under increasing scrutiny following a crash of one of its electric cars while using the controversial autopilot service. Joshua Brown crashed and died in Florida on May 7 in a Tesla car that was operating on autopilot, which means that Brown's hands were not on the steering wheel.  (Photo by Spencer Platt/Getty Images)
Tesla reported third-quarter delivery results ahead of earnings later this month. (Photo by Spencer Platt/Getty Images)

The big question now will be whether Tesla is able to translate these results into profits.

In the second quarter, Tesla posted then-record quarterly deliveries of 95,356 vehicles, helping drive a 60% year-over-year increase in revenue. But the company posted a much wider-than-expected loss over the same period, with its net loss attributable to common stockholders totaling $408 million.

At the time, Musk said he expected Tesla would only break-even for the third-quarter, pivoting to focus on “continuous volume growth, capacity expansion and cash generation” as a primary aim. Earlier in the year, Musk had anticipated that the company would be profitable in “all quarters going forward.”

Musk in July had also reiterated guidance for total deliveries to come in between 360,000 and 400,000 for the full fiscal year – a level which has come closer within reach after the solid third-quarter results.

“We continue to believe the biggest overhang around the story is Tesla's ability to hit its overall unit guidance for 2019 of 360k to 400k units with a strong 2H as this will be the telling tale of demand trends as Tesla is now a ‘demand story’ rather than a production story,” Wedbush analyst Dan Ives wrote in a note last week. “Hitting the 360k-400k unit demand guidance for 2019 is going to be a Herculean-like task in our opinion as ~345k-350k is likely the line in the sand as Street whisper numbers have continued to come down over the past few months.”

Tesla’s deliveries have resurged over the course of 2019 after a rocky start. The company handed over a disappointing 63,000 vehicles the first three months of the year amid struggles to get cars overseas to Europe and China.

In the months since, Tesla has grown to become a leader in the European electric-vehicle market, with tax incentives in some countries helping to propel demand. In the Netherlands, Tesla units sold grew nearly 400% from August to more than 5,700 in September, Bloomberg reported Tuesday, citing Bovag data. And Tesla’s Model 3 was Western Europe’s most registered battery-electric car in the first five months of the year, according to auto market intelligence consultant Matthias Schmidt, topping competitors including the Renault Zoe, Nissan Leaf and BMW i3.

At least one analyst pointed to similarly strong growth in Tesla’s sales in China. Citing insurance registration data, Piper Jaffray analyst Alexander Potter estimated in a note last week that Tesla’s 3Q deliveries rose 175% in China over the year prior. And more favorable policies could help support future sales in the region, where Tesla is also building out its Shanghai Gigafactory: In late August, China unexpectedly said it would exempt Tesla’s electric vehicles from the country’s purchase tax, amid a phase-out in China’s electric-vehicle subsidies that had been expected to crimp auto sales for Tesla and its overseas competitors.

Tesla is expected to report fiscal-third quarter earnings results on October 30.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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