Tesla Delivers Record 405,278 Cars in Quarter But Misses Target

(Bloomberg) — Tesla Inc . delivered fewer cars than expected last quarter despite offering strong incentives in its biggest markets, fueling demand concerns that contributed to the electric car company’s worst month and year for shares since its initial public offering read in 2010.

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The company delivered more than 405,278 vehicles to customers in the last three months, short of the average estimate of 420,760 compiled by Bloomberg. While the total was a quarterly record for Tesla, the company opened two new assembly plants last year and still reached its goal of expanding by 50%.

It’s also the third straight quarter that deliveries have missed estimates.

Several analysts cut price targets on the stock Tuesday and JPMorgan Chase said Tesla may never reach its multi-year sales growth goal of 50% again. “Our base case assumption is that year-over-year growth (while remaining impressive overall) is likely to decline each year from here,” analyst Ryan Brinkman, who has the equivalent of a sell rating on the shares, wrote in a research note.

Tesla fell 4.1% to $118.15 as of 8:18 am in New York before the start of regular trading.

After Chief Executive Officer Elon Musk predicted an “epic” end of the year, Tesla cut car prices and production in China, then offered a $7,500 discount in the United States. Concerns about rising interest rates, inflation and other economic headwinds — plus alarm over Musk’s antics on Twitter, which he now owns — sent Tesla shares plunging 37% in December and 65% last year.

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“We believe that Tesla is facing a significant demand problem,” Toni Sacconaghi, a Bernstein analyst with the equivalent of a sell rating on the stock, wrote in a report Monday. “We believe Tesla will need to either reduce its growth targets (and run its factories below capacity) or maintain and potentially increase recent price cuts globally, pressure on margins.”

Read more: Tesla Stock Had Worst Year Ever That doesn’t make it cheap

Tesla increased deliveries by 40% to 1.31 million last year, shy of the 50% average annual growth rate the company said it expects to achieve over several years. Production expanded 47% to 1.37 million dollars.

The company produced 439,701 vehicles in the fourth quarter, exceeding deliveries by 34,423 units. Tesla said it continued to transition to “a more even regional mix of vehicle construction,” which led to another increase in vehicles in public transportation at the end of the quarter.

“Tesla sells cars, and the auto industry is slowing down,” Gene Munster, managing partner of Loup Ventures, said by phone. “They are still struggling with logistics, and the gap between production and delivery has grown in the last quarter.”

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Musk said during Tesla’s recent earnings call that Tesla was trying to “double” deliveries during each quarter so that the company does not have a concentrated transmission wave at the end of each period. But design chief Franz von Holzhausen tweeted that it was up at a southern California delivery center on New Year’s Eve.

Tesla’s end-of-season rebates in the U.S. matched the maximum tax credit that electric vehicles qualify for under the Inflation Reduction Act signed by President Joe Biden in August. The car suffered a setback in this regard late last month when the Internal Revenue Service released a list of electric vehicles and plug-in hybrid vehicles that qualify for federal tax credits.

Most of Tesla’s models will not qualify under the current interpretation of the law because they are either too expensive or use batteries that are not fully compliant. The only car likely to pass muster is the seven-seat version of the Model Y, which means “consumers may have to order and spend an extra $3,000 for an unwanted/needed third row on the Model Y to qualify for a credit tax,” Toni Sacconaghi, an analyst at Bernstein who also has the equivalent of a sell rating on Tesla’s stock, wrote in a research report.

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Musk took issue with the IRS’s eligibility list in several tweets, writing “this is a mess” on Jan. 1 and questioning Monday whether the company was being penalized for making the Model Y too efficient.

Tesla doesn’t break down sales by region, but the United States and China are its biggest markets, with 95% of sales in 2022 being in the Model 3 sedan and Y crossover.

The company makes the S, X, 3 and Y models at its factory in Fremont, California. Its Shanghai plant produces the Model 3 and Y, and it began delivering the Model Y to its newest plants in Austin and near Berlin in the first half of last year.

While Musk delivered the first Tesla Semi trucks to PepsiCo Inc. In December, the company did not report any deliveries of the model in its quarterly statement. The automaker announced separately that it has scheduled an investor day for March 1, where it will discuss long-term expansion plans, a next-generation vehicle platform, capital allocation and other topics.

–With assistance from Craig Trudell.

(Updates and analyst comments from the fourth paragraph.)

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