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Tesla's Q1 Deliveries Tumble With International Expansion

Zacks Equity Research

Tesla, Inc.’s TSLA vehicle production and delivery numbers witnessed sequential declines of 10.9% and 31%, respectively, in the first quarter of 2019. It managed to produce roughly 77,100 vehicles — consisting of 62,950 Model 3, and 14,150 Model S and X. Out of the total delivered figure of 63,000 units, Tesla’s Model 3 accounted for 50,900 while Model S and X were 12,100.

During the quarter, this electric automaker struggled with Model 3 deliveries to Europe and China, owing to longer transit time. Nevertheless, several analysts anticipated the fall in deliveries as Tesla shifted to international markets with Model 3 for the first time. The company started delivering new Model 3 to China and Europe markets in January and February, amid a slowdown in demand in North America.

Tesla’s Model 3 shipments to international markets faced a few bumps in the last quarter, per Reuters. Misprinted labels delayed the shipments’ arrival in Shanghai while it faced unexpected challenges at the Belgian port of Zeebrugge. Longer transit time to deliver in international markets will likely to hurt Tesla’s working capital. The company reported having 10,600 vehicles in transit at the end of the quarter compared with 1,900 in the fourth quarter of 2018.

Tesla, Inc. Price and Consensus


Tesla, Inc. Price and Consensus | Tesla, Inc. Quote

Apart from managing transit time for international shipments, Tesla has to compete with Europe automakers that are launching several versions of electric vehicles, per Reuters.

Despite all such challenges ahead, the company did not lower the delivery guidance for 2019. For the current year, it reiterated its prior guidance of 360,000 to 400,000 vehicle deliveries. Also, it has been taking several steps to improve margins and generate profit in 2019. In a bid to cut costs, Tesla slashed employees, who delivered cars in the United States, and opted for store closures.

Shares of the company have underperformed the industry it belongs to in the past three months. Over this time frame, it has lost 12.9% against the industry’s growth of 3.3%.


Zacks Rank & Stocks to Consider

Tesla currently carries a Zacks Rank #5 (Strong Sell). A few better-ranked stocks in the broader auto sector are Geely Automobile Holdings Ltd. GELYY, Ferrari N.V. RACE and PACCAR Inc. PCAR. Geely Automobile and Ferrari currently sport a Zacks Rank #1 (Strong Buy) while PACCAR has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Geely Automobile has an expected long-term growth rate of 7%. Over the past six months, shares of the company have gained 13.4%.

Ferrari has an expected long-term growth rate of 18.5%. The stock has gained 2.9% in the past six months.

PACCAR has an expected long-term growth rate of 8.4%. Over the past six months, shares of the company have gained 0.5%.

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