In Tesla's (NASDAQ:TSLA) second quarter, deliveries of its electric vehicles came in at the low end of its guidance range, leading to a 13% sequential decline in deliveries. Can quarterly deliveries pick back up again in Tesla's third quarter?
With Tesla's third quarter set to close at the end of this month, investors will find out how the automaker's vehicle deliveries are faring next week. Tesla updates investors with its quarterly vehicle sales within three days of each quarter's end. Ahead of Tesla's update on quarterly vehicle deliveries, here's a preview of what investors should watch.
What to expect
Tesla didn't provide specific guidance for its third quarter, but management did guide for combined Model S and X deliveries in the second half of the year to be higher than in the first half of the year. For Tesla to pull this off, it will need to deliver more than 47,077 combined Model S and X units in the second half of the year, as this is how many vehicles Tesla delivered in the first half of the year.
In other words, for Tesla's third quarter, investors should expect the electric car-maker's combined Model S and X deliveries to be somewhere above 23,550 units in order for the company to be on pace with its guidance for the second half of the year.
Of course, investors may also be interested in whether Tesla opts to maintain its guidance for Model S and X deliveries for the rest of the year. In the past, Tesla has used its updates on quarterly vehicles as an opportunity to provide guidance. But Tesla hasn't always done this, so investors shouldn't count on it.
What about Model 3?
Another key area to watch in Tesla's update on quarterly deliveries will be any commentary on how Model 3 production and deliveries are faring. With the first deliveries started on July 28, Model 3 deliveries are expected to be paltry in Tesla's third quarter as the company ramps up production.
Though Tesla didn't provide any guidance in its second-quarter update on how many Model 3 deliveries to expect during the quarter, we know that Tesla delivered about 30 units at the end of July, and that management said it expected to produce "just over" 1,500 Model 3 units during the quarter.
If Tesla really did produce 1,500 Model 3 units in its third quarter, it could have delivered about 1,200 to 1,400 of those units before the quarter ended.
Add in an expected 1,200 to 1,400 Model 3 deliveries during Q3 to Tesla's expected 23,550 Model S and X deliveries, and the total expected deliveries for the company's third quarter are about 24,850 units.
Given the Model 3's importance to the future of Tesla's business, investors may be most interested in any updates from management on its outlook for Model 3. Though Tesla guided for Model 3 production of just 1,500 units in Q3, management expects Model 3 production and deliveries to climb quickly, following an S-curve that will ultimately help Tesla's annual production soar from a run-rate of 100,000 units today to 500,000 units next year.
In Tesla's second-quarter shareholder letter, management said it expected to achieve a weekly production run-rate for Model 3 of 5,000 vehicles before the end of 2017, and a weekly production run-rate of 10,000 Model 3s at some point next year. Is management on track with its ambitious production ramp-up plan?