Investor's Corner
Tesla slips on Q1 production and deliveries amid global growing pains, Model 3 remains market leader
Tesla has released its production and delivery figures for the first quarter of 2019, and closing out a quarter that clearly highlights the company’s growing pains amid its push for global expansion. In Q1 2019, Tesla produced a total of 77,100 vehicles, or down roughly 12% from the last quarter. Total deliveries declined to 63,000 vehicles, roughly 30% less than Q4 2018’s all-time-high of 90,700. Analysts were targeting 76,000 deliveries for the first quarter.
Tesla’s Q1 production numbers are comprised of 62,950 Model 3 vehicles, in line with the company’s guidance. Tesla also produced a total of 14,150 Model S and X, a pretty drastic drop from the more than 25,000 vehicles in Q4. Tesla did not provide commentary around the drop of Model S and X deliveries.
By the end of the quarter, Tesla had 10,600 vehicles in transit to customers, which are expected to be delivered in early Q2 2019. Tesla stated that the company had delivered roughly half of the quarter’s deliveries in the last 10 days, largely due to the time it took to ship Model 3’s to Europe and China.
Despite the quarter falling below expectations, the company is still targeting to deliver 360,000 – 400,000 vehicles for the full year 2019. Tesla’s commitment to its original expectations would mean that the company has to deliver 99,000 – 112,300 vehicles for each of the following three quarters. The company stated that their net income would be negatively impacted by the lower than expected deliveries, but that they ended the quarter with “sufficient cash.”
You can read Tesla’s Q1 2019 delivery and production report in its entirety below.
PALO ALTO, Calif., April 03, 2019 (GLOBE NEWSWIRE) — In the first quarter, we produced approximately 77,100 total vehicles, consisting of 62,950 Model 3 and 14,150 Model S and X.
Deliveries were approximately 63,000 vehicles, which was 110% more than the same quarter last year, but 31% less than last quarter. This included approximately 50,900 Model 3 and 12,100 Model S and X.
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.
Because of the lower than expected delivery volumes and several pricing adjustments, we expect Q1 net income to be negatively impacted. Even so, we ended the quarter with sufficient cash on hand.
In North America, Model 3 was yet again the best-selling mid-sized premium sedan, selling 60% more units than the runner up. Inventory of Model 3 vehicles in North America remains exceptionally low, reaching about two weeks of supply at the end of Q1, compared to the industry average of 2-3 months.
Despite pull forward of demand from Q1 2019 into Q4 2018 due to the step down in the federal tax credit, US orders for Model 3 vehicles significantly outpaced what we were able to deliver in Q1. We reaffirm our prior guidance of 360,000 to 400,000 vehicle deliveries in 2019.
Given that Tesla vehicle production currently occurs entirely from one factory in the San Francisco Bay Area, but must be delivered to customers all around the world, production could be significantly higher than deliveries, as it was this quarter, when production exceeded deliveries by 22%.
We’ve just begun the global expansion of Model 3, and we want to thank our employees for their hard work and our customers for supporting our mission. We are doing everything we can to deliver cars globally as quickly as possible and look forward to continuing to scale deliveries throughout the year.
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Our net income and cash flow results will be announced along with the rest of our financial performance when we announce Q1 earnings. Our delivery count should be viewed as slightly conservative, as we only count a car as delivered if it is transferred to the customer and all paperwork is correct. We count a produced but undelivered vehicle to be in transit if the related customer has placed an order or paid the full purchase price for such vehicle. Final numbers could vary by up to 0.5%. Tesla vehicle deliveries represent only one measure of the company’s financial performance and should not be relied on as an indicator of quarterly financial results, which depend on a variety of factors, including the cost of sales, foreign exchange movements and mix of directly leased vehicles.
Forward-Looking Statements
Certain statements herein, including statements regarding expected future vehicle deliveries and production and our expected financial results, are “forward-looking statements” that are subject to risks and uncertainties. These forward-looking statements are based on management’s current expectations. Various important factors could cause actual results to differ materially, including the risks identified in our SEC filings. Tesla disclaims any obligation to update this information.
Tesla has scheduled its Earnings Call for Q4 and Full Year 2025 for next Wednesday, January 28, at 5:30 p.m. EST, and investors are already preparing to get some answers from executives regarding a wide variety of topics.
The company accepts several questions from retail investors through the platform Say, which then allows shareholders to vote on the best questions.
Tesla does not answer anything regarding future product releases, but they are willing to shed light on current timelines, progress of certain projects, and other plans.
There are five questions that range over a variety of topics, including SpaceX, Full Self-Driving, Robotaxi, and Optimus, which are currently in the lead to be asked and potentially answered by Elon Musk and other Tesla executives:
- You once said: Loyalty deserves loyalty. Will long-term Tesla shareholders still be prioritized if SpaceX does an IPO?
- Our Take – With a lot of speculation regarding an incoming SpaceX IPO, Tesla investors, especially long-term ones, should be able to benefit from an early opportunity to purchase shares. This has been discussed endlessly over the past year, and we must be getting close to it.
- When is FSD going to be 100% unsupervised?
- Our Take – Musk said today that this is essentially a solved problem, and it could be available in the U.S. by the end of this year.
- What is the current bottleneck to increase Robotaxi deployment & personal use unsupervised FSD? The safety/performance of the most recent models or people to monitor robots, robotaxis, in-car, or remotely? Or something else?
- Our Take – The bottleneck seems to be based on data, which Musk said Tesla needs 10 billion miles of data to achieve unsupervised FSD. Once that happens, regulatory issues will be what hold things up from moving forward.
- Regarding Optimus, could you share the current number of units deployed in Tesla factories and actively performing production tasks? What specific roles or operations are they handling, and how has their integration impacted factory efficiency or output?
- Our Take – Optimus is going to have a larger role in factories moving forward, and later this year, they will have larger responsibilities.
- Can you please tie purchased FSD to our owner accounts vs. locked to the car? This will help us enjoy it in any Tesla we drive/buy and reward us for hanging in so long, some of us since 2017.
- Our Take – This is a good one and should get us some additional information on the FSD transfer plans and Subscription-only model that Tesla will adopt soon.
Tesla will have its Earnings Call on Wednesday, January 28.
Elon Musk
Tesla locks in Elon Musk’s top problem solver as it enters its most ambitious era
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla has granted Senior Vice President of Automotive Tom Zhu more than 520,000 stock options, tying a significant portion of his compensation to the company’s long-term performance.
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla secures top talent
According to a Form 4 filing with the U.S. Securities and Exchange Commission, Tom Zhu received 520,021 stock options with an exercise price of $435.80 per share. Since the award will not fully vest until March 5, 2031, Zhu must remain at Tesla for more than five years to realize the award’s full benefit.
Considering that Tesla shares are currently trading at around the $445 to $450 per share level, Zhu will really only see gains in his equity award if Tesla’s stock price sees a notable rise over the years, as noted in a Sina Finance report.
Still, even at today’s prices, Zhu’s stock award is already worth over $230 million. If Tesla reaches the market cap targets set forth in Elon Musk’s 2025 CEO Performance Award, Zhu would become a billionaire from this equity award alone.
Tesla’s problem solver
Zhu joined Tesla in April 2014 and initially led the company’s Supercharger rollout in China. Later that year, he assumed the leadership of Tesla’s China business, where he played a central role in Tesla’s localization efforts, including expanding retail and service networks, and later, overseeing the development of Gigafactory Shanghai.
Zhu’s efforts helped transform China into one of Tesla’s most important markets and production hubs. In 2023, Tesla promoted Zhu to Senior Vice President of Automotive, placing him among the company’s core global executives and expanding his influence beyond China. He has since garnered a reputation as the company’s problem solver, being tapped by Elon Musk to help ramp Giga Texas’s vehicle production.
With this in mind, Tesla’s recent filing seems to suggest that the company is locking in its top talent as it enters its newest, most ambitious era to date. As could be seen in the targets of Elon Musk’s 2025 pay package, Tesla is now aiming to be the world’s largest company by market cap, and it is aiming to achieve production levels that are unheard of. Zhu’s talents would definitely be of use in this stage of the company’s growth.
Tesla analyst Andrew Percoco of Morgan Stanley teased the company’s dominance in its self-driving initiative, stating that its lead over competitors is “not even close.”
Percoco recently overtook coverage of Tesla stock from Adam Jonas, who had covered the company at Morgan Stanley for years. Percoco is handling Tesla now that Jonas is covering embodied AI stocks and no longer automotive.
His first move after grabbing coverage was to adjust the price target from $410 to $425, as well as the rating from ‘Overweight’ to ‘Equal Weight.’
Percoco’s new note regarding Tesla highlights the company’s extensive lead in self-driving and autonomy projects, something that it has plenty of competition in, but has established its prowess over the past few years.
He writes:
“It’s not even close. Tesla continues to lead in autonomous driving, even as Nvidia rolls out new technology aimed at helping other automakers build driverless systems.”
Percoco’s main point regarding Tesla’s advantage is the company’s ability to collect large amounts of training data through its massive fleet, as millions of cars are driving throughout the world and gathering millions of miles of vehicle behavior on the road.
This is the main point that Percoco makes regarding Tesla’s lead in the entire autonomy sector: data is King, and Tesla has the most of it.
One big story that has hit the news over the past week is that of NVIDIA and its own self-driving suite, called Alpamayo. NVIDIA launched this open-source AI program last week, but it differs from Tesla’s in a significant fashion, especially from a hardware perspective, as it plans to use a combination of LiDAR, Radar, and Vision (Cameras) to operate.
Percoco said that NVIDIA’s announcement does not impact Morgan Stanley’s long-term opinions on Tesla and its strength or prowess in self-driving.
NVIDIA CEO Jensen Huang commends Tesla’s Elon Musk for early belief
And, for what it’s worth, NVIDIA CEO Jensen Huang even said some remarkable things about Tesla following the launch of Alpamayo:
“I think the Tesla stack is the most advanced autonomous vehicle stack in the world. I’m fairly certain they were already using end-to-end AI. Whether their AI did reasoning or not is somewhat secondary to that first part.”
Percoco reiterated both the $425 price target and the ‘Equal Weight’ rating on Tesla shares.
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