Please ensure Javascript is enabled for purposes of website accessibility

Tesla, Inc.'s Q2 Deliveries: Up 53% Year Over Year, But Down Sequentially

By Daniel Sparks - Jul 3, 2017 at 4:41PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

As Model S and Model X deliveries level off, Tesla will need its upcoming Model 3 to serve as the company's next major growth driver.

Electric-car maker Tesla (TSLA 1.24%) delivered just over 22,000 vehicles in its second quarter, the company said on Monday in a press release. The figure was at the low end of Tesla's guidance for the quarter.

Tesla's second-quarter deliveries highlight several noteworthy trends in the company's vehicle sales, including a sequential decrease in total vehicle sales, as well as the first-ever sequential decrease in Model X sales.

Tesla Model S and Model X outside of the company's factory.

Model S (left) and Model X (right) outside of Tesla's factory. Image source: author.

Tesla's second-quarter deliveries

With total Model S and Model X deliveries during Q2 at just over 22,000 units, deliveries were up hugely on a year-over-year basis. Year-over-year growth during this period was 53%. But vehicle sales were down 12% compared to the first quarter of 2017.

Bar chart of Tesla's quarterly vehicle deliveries by model.

Data source: Tesla quarterly SEC filings and vehicle delivery updates. Chart source: author.

Tesla said the pullback in second-quarter deliveries was due to its introduction of a 100 kilowatt-hour (kWh) battery.

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, when Tesla resolved the production bottleneck, production for its vehicles was approximately 40% below demand levels, Tesla said. But after the issue was addressed, June orders and deliveries were "one of the best in Tesla history," management noted.

Interestingly, Tesla's late-2015 launched Model X suffered its first sequential decline in deliveries. Model X deliveries were up 116% year over year but were down 13% sequentially. Despite the pullback in Model X deliveries, Tesla is optimistic about the SUV's potential. "There appears to be substantial untapped sales potential for Model X," Tesla said.

With its second quarter behind it, Tesla's deliveries in the first half of the year were within management's guidance range for the period. In its fourth-quarter 2016 shareholder letter, Tesla said it expected to deliver between 47,000 and 50,000 Model S and Model X vehicles during this time. And Tesla maintained this outlook in its first-quarter shareholder letter. First-half deliveries were about 47,100.

Looking ahead: sales growth and Model 3

Going into the second half of the year, Tesla expects Model S and Model X deliveries to grow, even as it brings its Model 3 to market at the end of July. Tesla said it believes Model S and Model X deliveries will likely exceed Tesla's 47,100 deliveries in the second half. If this is the case, total Model S and Model X deliveries during 2017 would be above 94,200.

These optimistic expectations for Model S and Model X throughout 2017 suggest management doesn't anticipate cannibalization of the two flagship vehicles when the $35,000 Model 3 starts delivering to customers.

A black Tesla Model 3 makes a turn while being driven.

Telsa will start deliveries of its Model 3 at the end of July. Image source: Tesla.

Speaking of Model 3, Tesla used the delivery release as an opportunity to reiterate that the Model 3 met all regulatory requirements for production this week. In addition, Tesla confirmed that it expects to deliver about 30 Model 3 units at its Fremont factory on July 28. "More details to follow soon," Tesla said about the handover event.

As the Model 3 comes to market at the end of this month, and as Model S and Model X delivery growth slows, Tesla will increasingly rely on its upcoming Model 3 for sales growth. Tesla has previously said it expects to achieve a production rate for Model 3 of 5,000 vehicles per week before the end of 2017, and 10,000 vehicles per week at some point in 2018.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Tesla, Inc. Stock Quote
Tesla, Inc.
$681.79 (1.24%) $8.37

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.