Tesla Q2 Sales Miss Expectations, "Severe" Battery Production Shortfall Blamed

Heading into today's car delivery estimate, Tesla had previewed that for the first half of 2017 it expects a substantial jump in vehicle deliveries. Recall that management guided for a 61% to 71% increase in Model S and Model X deliveries during H1 of 2017 compared with the first half of 2016. To achieve this goal, Tesla would need to deliver 47,000 to 50,000 vehicles in Q1 and Q2 combined. Moments ago Tesla announced its first half vehicle deliveries, and it made the low end of this guidance: just barely, with 47,100 autos delivered.

Tesla delivered just over 22,000 vehicles in Q2, of which just over 12,000 were Model S and just over 10,000 were Model X. This represents a 53% increase over Q2 2016. Total vehicle deliveries in the first half of 2017 were approximately 47,100.

However, where Tesla clearly failed to deliver was relative to sellside consensus which expected the electric car maker to sell 22,912 cars in Q2. Instead, the official number was 22,000. Which explains the very next sentence, in which Elon Musk delivered the latest the mea culpa why the company once again failed to hit expected deliveries.

The major factor affecting Tesla's Q2 deliveries was a severe production shortfall of 100 kWh battery packs, which are made using new technologies on new production lines. The technology challenge grows exponentially with energy density. Until early June, production averaged about 40% below demand. Once this was resolved, June orders and deliveries were strong, ranking as one of the best in Tesla history.

Odd how this production bottleneck was never made clear to any of the analysts covering the company so they could adjust their forecasts accordingly.

Tesla also issued a conditional guidance for second half, in which Tesla said that "provided global economic conditions do not worsen considerably, we are confident that combined deliveries of Model S and Model X in the second half of 2017 will likely exceed deliveries in the first half of 2017."

And since Tesla will likely miss, or once again just barely make its guidance, we look forward to seeing just what economic conditions will "worsen considerably" preventing Musk from hitting yet another projection.

Some other details from the press release:

Q2 production totaled 25,708 vehicles, bringing first half 2017 production to 51,126.


We always want our customers to experience the newest versions of Model S and X while their cars are in service, so we added fully loaded, newly built cars to our service loaner fleet. We always want the service loaner Tesla to be *better* than the customer car being serviced. The customer should never suffer for something that is our fault.


We also finally added a sufficient number of Model X cars to our test drive and display fleet because our stores had been operating with far short of what was needed and, in some cases, none at all. There appears to be substantial untapped sales potential for Model X. It should also be noted that production quality and field reliability of the Model X, for which Tesla has been fairly criticized, have improved dramatically. It is now rare for a newly produced Model X to have initial quality problems.


The first certified production Model 3 that meets all regulatory requirements will be completed this week, with a handover of ~30 customer cars at our Fremont factory on July 28. More details to follow soon.

And another caveat: "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. 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."

Finally, based on the latest Model X sales, it appears that the "coolness" shelf-life of a new Tesla model is just under two years.


GUS100CORRINA Zarbo (not verified) Mon, 07/03/2017 - 16:09 Permalink

Tesla Q2 Sales Miss Expectations, "Severe" Battery Production Shortfall BlamedMy response: I know there are a lot of TESLA fans out in the public, but I want to remind everyone that GOLDMAN "SLACKS" has a SELL rating on the stock with a price target of 185-187 per share. That price level is an awful long way below the current 350 price level.BUYER BEWARE!!!For the life of me, I can't figure out why so many stocks are elevated beyond reasonable logic. I could name 100 more, but what is the point? Maybe this is the NEW NORMAL idea where fundamentals will never, ever matter again. I am just having trouble getting used to the NEW NORMAL idea.

In reply to by Zarbo (not verified)

Endgame Napoleon gilhgvc Mon, 07/03/2017 - 22:35 Permalink

Well, what happens to these high-end auto stocks if the low-end auto market crumbles, like Stockman says? Does that make the high end of the market more successful? I have no idea. I am no finance/math person to say the least, but it seems like the high end might be more important in that case. Maybe, not....?

In reply to by gilhgvc

not dead yet GUS100CORRINA Mon, 07/03/2017 - 16:29 Permalink

Nothing new here. Most likely have momentum buyers elevating the stock with shorts being squeezed along the way. As we have noticed this can go on for quite some time. When the momentum shits to the downside those that pushed the stocks higher based only momentum will join the shorts and kill those stocks and possibly the market. Shades of 1987, 2000,and 2008. But it's different this time. Most of the people peddling that fiction are either stupid or setting up the peons to get cleaned out while they rake in the big bucks.

In reply to by GUS100CORRINA

SloMoe Mon, 07/03/2017 - 15:06 Permalink

So, production constrained, yet able to add "fully-loaded" cars into their loaner, test-drive, and display fleet. Hum. In other words, channel-stuffing, Tesla style...

silverer SloMoe Mon, 07/03/2017 - 15:12 Permalink

Hey, they only have to compete now with what will be the best used car bargains in years out there. All car channels are already stuffed to the max. This whole Tesla thing reminds me of that high speed California train that will run mostly empty. "Build it and they will come" only works with baseball fields.

In reply to by SloMoe

not dead yet SloMoe Mon, 07/03/2017 - 16:37 Permalink

Tesla is opening dealerships in the US and has them around the world. Notice how Tesla was going to break the dealership model yet they are opening dealerships and have and are adding considerably more repair shops. So how many of those in transit cars are headed for dealer lots? In the last quarter sales in the US dropped like a rock to 2000 units. Tesla is having problems opening their dealerships in the US because of state laws fobidding manufacturers from owning dealerships.

In reply to by SloMoe

SILVERGEDDON Mon, 07/03/2017 - 15:07 Permalink

Model X looks like a baboon got fucked by a manatee whale. Nothing to do with batteries, an d everything to do with being a fucking loser car design.  

MEFOBILLS Mon, 07/03/2017 - 15:10 Permalink

Koenigsegg direct drive:A variation of KDD would kill Tesla: Lightweight direct drive with ICE (internal combustion engine) directly connected to wheels by way of a lock up torque converter.  Batteries then are only for 0-30 mph or so, then ICE takes over.  Super simple drivetrain, lightweight, and battery packs may be made smaller due to less battery power needs.  https://www.youtube.com/watch?v=glf_k4qGBAA

MEFOBILLS PrivetHedge Mon, 07/03/2017 - 16:57 Permalink

Diesel fuelled gas turbine generator: job done.Generator to Electrial Conversion is losses for generator, to then power electric motor.  Low efficiency.  Better with a direct drive like KDD... low energy loss as engine mechanical motion is directly converted to wheel rotary motion, and without weight penalty of a geared transmission.  High efficiency.

In reply to by PrivetHedge

MEFOBILLS VWAndy Mon, 07/03/2017 - 19:17 Permalink

A proper CVT belt drive could also get the job done. Or a high quality sequential gearbox.The idea is to be able to recharge batteries when you slow down, thus recovering braking losses.  The other idea is to keep weight down.  KDD is lightweight and efficient.No transmission is necessary just torque conversion when needed.  

In reply to by VWAndy

not dead yet Versengetorix Mon, 07/03/2017 - 16:49 Permalink

In foreign countries, like Denmark, and in US states when state subsidies are eliminated sales of electric cars drop considerably. Imagine the carnage if the FED's drop their generous $7500 tax cut for the rich. Elon is headed towards the no mans land where once a manufacturer hits a total of 200,000 units produced the FED buyer bonus gets gradually reduced over the next year before being totally eliminated. Explains why Elon is in such a hurry to get his 3 on the road so his buyers don't miss the taxpayer handout and buy elsewhere. Elon should have given a little more thought before he quit Trumps business council as that puts a wrench into Elon getting more handouts when the current ones expire.

In reply to by Versengetorix

GodHelpAmerica (not verified) Mon, 07/03/2017 - 15:23 Permalink

The real Tesla--Nikola Tesla-- could have built a self-sufficient planet by now, with access to all the cheap money Musk has blown. Musk is a joke. He's not an innovator; he's a destroyer of capital.