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Tesla Delivers Record Number of Vehicles

Sejuti Banerjea

In typical fashion, Elon Musk created that seemingly insurmountable hurdle and then attempted to clear it.

When the company was still ironing out the “perfect” assembly that would allow it to churn out thousands of vehicles a week, when the street was still trying to figure out what would be feasible, Musk started setting out targets for himself and Tesla TSLA, things that his critics could continue calling him out on, every time he missed them.

But there’s an important lesson there about goal setting. You’re supposed to set targets that look just that much out of reach, so in endeavoring to reach it, you rev up your energy, innovation, creativity, you name it, to get there. And it doesn’t really matter that you didn’t hit that target, because you came up pretty close.

Maybe even close enough to hit that really ambitious target of 360,000 to 400,000 vehicles this year. As I was saying in an earlier blog, the growth trajectory is awesome, it’s exciting and it brings confidence in the company’s ability to deliver an ever-growing number of vehicles. Delivery is clearly an issue right now because all the cars are shipping from the U.S. But The Chinese factory will soon get into production, which will ease things a bit.

Musk says that backlog continues to grow and that the company is doing all it can to meet the strong demand it’s seeing. Not quite there yet, but this is a good problem to have.

Another little tidbit that some investors could be concerned about is the growing percentage of vehicles under lease accounting. This essentially means that Tesla won’t recover the entire cost upfront, but will receive it in some sort of instalments. Obviously, the near term impact is negative as revenues are lowered, especially for a company in its early growth phase as it also limits cash flow. So the fact that 15% of Model S and X and 8% of Model 3 deliveries were leases, up from a respective10% and 5.6% in the previous quarter, can be something to keep an eye on.

In the slightly longer term however, it can’t be considered negative at all because of the improved visibility in out quarters and the stability it brings to revenue.  

Let’s Take a Look at the Numbers

Tesla delivered 97,000 vehicles in the last quarter, compared with 99,000 expected and an internal target of 100,000.

Of these, 79,600 (82.1%) were Model 3 sedans and 17,400 (17.9%) were Model S cars and Model X crossovers. Of the 84,000 delivered in the previous quarter, 56,000 (66.7%) were Model 3s. The growing mix of lower-end Model 3s and declining sales of the higher-end vehicles are likely to impact margins.

The U.S., China, Norway and the Netherlands are its biggest markets. While the company doesn’t mention region-wise performance in its quarterly delivery statement, a Reuters news report that studied registration data in Norway, said that at 3,300 units, the Model 3 was the top-selling car in the country. The number is however down from Norwegian Road Federation numbers of 6,123 in the first quarter and 4,438 in the second.

Recommendations

Tesla shares carry a Zacks Rank #3 (Hold). So buy-ranked General Motors Company GM, IAA, Inc. IAA and Douglas Dynamics, Inc. PLOW are better stocks to buy right now.

 

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