Tesla drove a record 405,278 cars in the quarter but missed the target

Tesla drove a record 405,278 cars in the quarter but missed the target

(Bloomberg) — Tesla Inc. sold fewer vehicles in the fourth quarter than expected despite massive incentives being offered in its largest market, adding to demand concerns that have contributed to the worst month and year for the electric vehicle maker’s stock since its initial public offering in 2010.

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The company delivered more than 405,278 vehicles to customers in the past three months, less than 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 is still short of its 50% expansion goal.

It’s also the third consecutive quarter that deliveries have failed estimates.

Several analysts lowered their price target for the stock on Tuesday, and JPMorgan Chase said Tesla may again not reach its multi-year sales growth target of 50%. The analyst Ryan Brinkman, who has a “sell” rating on the stock, wrote in a research note.

Tesla shares fell 4.1% to $118.15 at 8:18 a.m. in New York, before the start of regular trading.

After CEO Elon Musk predicted an “epic” end to the year, Tesla slashed car prices and production in China, then offered $7,500 in cuts in the US. Concerns about rising interest rates, inflation and other economic headwinds — as well as concern about Musk’s antics on Twitter, which he now owns — sent Tesla shares down 37% in December and 65% last year.

“We think Tesla is facing a significant demand problem,” Tony Sacconaghi, a Bernstein analyst with a par-sell rating on the stock, wrote in a report Monday. “We believe Tesla will need to either reduce its growth targets (and operate its factories below capacity) or maintain and possibly increase recent price cuts globally, putting pressure on margins.”

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

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

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 level regional mix of vehicle construction,” which led to another increase in passing cars at the end of the quarter.

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

Musk said during Tesla’s recent earnings call that Tesla was trying to “ease” deliveries during each quarter so that the company wouldn’t have a wave of concentrated deliveries at the end of each period. However, design chief Franz von Holzhausen tweeted that he walked into a delivery center in Southern California on New Year’s Eve.

The rebates offered by Tesla in the US at the end of the quarter matched the maximum tax credit that electric cars are entitled to under the Inflation Reduction Act President Joe Biden signed into law in August. The automaker suffered a setback in that regard late last month when the Internal Revenue Service published a list of hybrid and electric vehicles eligible for federal tax credits.

Most Tesla models will not qualify under current interpretations of the law because they are either too expensive or use completely incompatible batteries. The only car likely to pass muster is the seven-seater version of the Model Y, which means “consumers may have to order and spend an extra $3,000 for a third row they don’t want/need in the Model Y to qualify for a car,” wrote Tony Sacconaghi, an analyst at Bernstein who It also has a sell rating equivalent to Tesla shares, per the research report.

Musk took issue with the IRS eligibility list in several tweets, writing “This is messed up” on Jan. 1 and on Monday wondering if the company was being penalized for making the Model Y so efficient.

Tesla doesn’t do sales by region, but the US and China are its largest markets, and 95% of sales in 2022 were from the Model 3 sedan and Y crossover.

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

While Musk delivered Tesla’s first semi-trucks to PepsiCo Inc. In December, the company reported no deliveries of the model in its quarterly statement. The automaker separately announced that its Investor Day is scheduled for March 1, when it will discuss long-term expansion plans, a next-generation auto platform, capital allocation and other topics.

– With assistance from Craig Trudell.

(Updates with analyst comment from fourth paragraph.)

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