Tesla Deliveries Drop, Shares Fall. Here’s Why That Is (and Isn’t) a Big Deal.

If you read the New York Times story “Tesla Stock Slides After Delivery Figures Signal Weaker U.S. Demand” over your coffee this morning, or more likely just scrolled past a tweet describing the EV automaker’s disappointing first quarter, you’re not getting the whole story of what’s happening. Don’t sell your shares or cancel your Model 3 order just yet.

Yes, deliveries fell 31 percent compared with last quarter (but they’re up 110 percent compared to the same quarter last year). Yes, shares took an 11 percent dive when trading opened Thursday morning (but they’re creeping back up at the time of writing). And yes, when net income is reported, it will most likely be “negatively impacted” — Elon Musk’s company said as much in yesterday’s note to investors.

So is there really weaker U.S. demand? And does this signal trouble for Tesla’s future?

Why this news isn’t a big deal:

  • The decline is a record, but deliveries are still historically high: Bloomberg reported that this drop was a “record decline.” But as you can see in a chart compiled by Statista, Tesla deliveries were on a relatively steady climb until the third quarter of 2018, when they more than doubled to 83,500. In quarter four, they were 90,700. All the hubbub is because they’re back down to 63,000, a whopping 22K higher than three quarters ago.
  • It was the first quarter the Model 3 shipped to China and Europe: The company’s mass-market sedan just started entering these potentially massive markets, “which present their own logistical challenges and mean Tesla wasn’t quite so focused on getting as many cars out as possible,” writes Jalopnik.
  • Tesla has more orders than they can complete: In the investors note, Tesla noted that “approximately 10,600 vehicles were in transit to customers globally” at the end of this quarter. “By comparison, only 1,900 vehicles were in transit at the end of the fourth quarter,” writes Autoblog. Basically, demand is there, but Tesla only has one factory and less experience delivering cars globally than say the VW Groups and Toyotas of the world. But a Chinese factory is underway with a goal of opening later this year, so if that is met, Tesla should be back on the up and up.

Why it is a big deal:

  • Tesla has more orders than they can complete: This is a double-edged sword. The idea of demand outweighing production sounds good in theory. But in Tesla’s case, it’s a product of potentially damaging growing pains — the expected problems of trying to build “a quarter of a million cars a year in one plant” (their goal for 2019 is 360K to 400K) and the unexpected problems of a social-media crazed CEO. If the company can’t get both the production and their fearless leader under control, then we can expect more problems in the future.

For now, all you Tesla shareholders can take a deep breath and see how this plays out, preferably listening to MC Musk’s latest track with a bottle of Bombay.

Main image courtesy of Tesla