Tesla’s Electric Car Deliveries Sail Past Expectations, Driving Shares To Record Territory

Tesla reported second-quarter deliveries of its electric cars and crossovers that were down from a year ago but significantly higher than most analysts anticipated, sending the share price to its highest ever a day after the company became the world’s most valuable automaker

The Palo Alto, California-based company said it delivered 90,650 units of its Mody 3, Y, S and X vehicles to customers in the quarter, down from 95,200 a year ago, but far more than the consensus expectation of fewer than 70,000 vehicles. Although Tesla’s main California plant was closed for about half of the quarter, the company was able to operate its new Shanghai plant throughout the period. It also benefited from an unusually large amount of inventory. Tesla started the period holding more than 14,000 vehicles produced but not sold in the first quarter of 2020, the most inventory on hand in company history, based on a review of quarterly figures by Forbes stretching back to 2010.

The shares jumped about 8% to $1,212 in morning Nasdaq
trading–nearly tripling this year–and boosted Tesla’s market capitalization to about $224 billion. Investor exuberance for the shares made it the world’s most valuable automaker on July 1, speeding past Toyota Motor Corp. even though Tesla annually sells far less than a tenth of as many vehicles worldwide.

Quarterly vehicle production totaled 82,272 units, 20,000 fewer than in the first quarter, but more than anticipated because of a coronavirus pandemic-related shutdown in the U.S. that lasted seven weeks. The company’s plant in China, which opened in January, was a gamechanger during the quarter, preventing a massive contraction that would have happened if Tesla still had only its Fremont, California, facility. 

“Assuming a ~7k/week production rate exiting Q1, we estimate Fremont produced ~42k vehicles during the quarter, implying ~40k vehicles (~3k+/week) in Shanghai, up from our estimate of 500-600 units/week in Q,”  Ben Kallo, an equity analyst for RW Baird, said in a research note. “With strong Q2 volumes, GAAP profitability is now in focus and appears achievable, which could lead to inclusion in the S&P 500.” 

Tesla is in a major period of transition as cofounder and CEO Elon Musk pushes his electric vehicle company to shake off its niche status and become a high-volume global manufacturer. Opening the Shanghai plant was a critical step in that process, giving the company access to the world’s largest auto market and biggest buyer of electric vehicles, and plant in Germany is under construction to supply battery-powered Teslas
for customers in the EU as early as next year. Tesla is also in talks with Texas and other states about a new U.S. plant to produce its hard-edged Cybertruck.

Kallo had expected Tesla to report 73,000 deliveries in the quarter, though analyst Brian Johson of Barclays had noted earlier this week that consensus delivery and production estimates were too low. 

“It appears that analysts have not updated estimates from the depths of the COVID lockdowns; consensus is ~70k units; we believe 85k is in reach, given: a) strong production ramp in China; and b) June closes in Europe and NA that are sequentially up, albeit with fewer units than prior” quarters, Johnson said in a June 30 research note. 

While Tesla topped his delivery estimate by 5,000 units, it fell short of his 91,000-vehicle production target during the quarter. The company will release quarterly financial results in the next few weeks.