Tesla's Q3 Performance and the Bigger Picture

The latest data on Tesla's production and delivery numbers is available, and the figures are not entirely unexpected. They slightly dropped in comparison to Q2, just as Tesla had mentioned in their recent earnings call. A total of 430,488 units were produced, with 435,059 units successfully delivered. My personal estimate was set at 455,000 units, which means I was off by roughly 4%. Interestingly, my estimate was still closer than what Wall Street projected.

In my opinion, given the number of cars Tesla had in transit and inventory, I anticipated a higher delivery number. However, logistics and operations are not as straightforward as they appear. When analyzing these numbers, it's essential to look beyond just one quarter and recognize Tesla's impressive growth trajectory over the past few years.

Many might label this quarter as a "miss" for Tesla, especially when juxtaposed against Wall Street's predictions. But it's essential to note that predictions, whether from Wall Street or independent analysts, are just educated guesses. Tesla remains aligned with their original guidance for the year. In fact, when compared to Q3 of the previous year, Tesla's growth stands at 26.5%. This growth is commendable, especially considering the temporary halt in their production due to the Model 3 update.

Breaking down Tesla's performance further:

- In the first three quarters of 2022, Tesla delivered 908,573 units.
- Only in the first two quarters of 2023, 889,015 units were delivered. This is almost on par with the entire performance from the first three quarters of the previous year.

These numbers challenge Gordon Johnson's claims that Tesla's growth has plateaued. In just the first three quarters of 2023, Tesla delivered 1,324,074 units, surpassing their total deliveries for 2022, which stood at 1,313,851. This is undeniable growth.

Tesla's production figures tell a similar success story. With one quarter still remaining in 2023, their production numbers are nearly on par with the entire 2022. They produced 1,369,611 cars in 2022, while the count for the first three quarters of 2023 is 1,350,996. The growth is evident, irrespective of Gordon Johnson's viewpoints. In the first three quarters of 2022, 929,910 units were produced, marking a growth of more than 45% this year. In an era of high interest rates and global economic challenges, such growth figures for high-value products are commendable.

One strategy that Tesla has employed is prioritizing sales volume over immediate automotive profits. They are banking on future software profits, especially from services like the Full Self Driving (FSD) package. It's worth mentioning that 2022 was a unique year. The average selling price (ASP) of a Tesla vehicle was notably high, and there were challenges related to the ramping up of two new factories. However, even with these challenges, the cost of producing a Tesla in Q2 2023 reverted to the levels seen in Q2 2021. As the new factories increase their production volumes, we can anticipate further cost reductions. Even with a 20% lower ASP in Q2 2023 compared to Q2 2022, their Gross Margin (GM) remained competitive at 19.2%, surpassing other industry players.

To achieve their 2023 delivery target of 1.8 million units, Tesla would need to deliver 475,926 units in Q4. This seems feasible, especially considering there won't be any production stops as witnessed in Q3. Optimistically, their production could cross the 500,000 mark, leading to deliveries exceeding 480,000 units. While it's unlikely for Tesla to cross 1.9 million deliveries in 2023, a figure between 1.8-1.82 million appears plausible. It's worth noting that Tesla's guidance remains at 1.8 million, emphasizing that they are on track.

In the coming days, many discussions will revolve around Tesla's Q3 performance, with some treating it as a pivotal moment for the company. However, it's worth asking: Do many remember the specifics of Q3 2021? For context, Tesla's Q3 2021 deliveries were up 71% YoY. The current Q3 figures are 86% higher than that. If we go back another year to Q3 2020, the present numbers are a staggering 211% higher.

Tesla's growth over the years has been phenomenal, unmatched by any large manufacturer. Despite challenges like production line upgrades, they've managed a growth of 26% compared to last year's Q3. As we look forward to Q3 2024, it's safe to expect another impressive year-on-year growth, making this quarter just another data point in Tesla's upward trajectory.

We await October 18th for Tesla's earnings report, which will provide deeper insights into Q3's revenue, profits, and more. For now, one thing is clear: the Tesla growth story continues, and it's nothing short of impressive.

Watch my video on the topic here: 

Thanks for reading. Lars Strandridder, BestInTESLA