With electric-car maker Tesla (TSLA -0.53%) slated to report vehicle deliveries for its third quarter next week, one of the more interesting facets of the report will be the company's Model S deliveries. Launched in 2012, the electric vehicle is Tesla's oldest model that is still in production; its sales have been challenged recently.
Though Tesla's Model S deliveries were up 23% year over year in the company's second quarter, the model's deliveries were down 11% sequentially. It has been over a year since Model S sales last peaked. Could Model S sales see another sequential decline in Q3? Or will they pick back up?
Model S. Image source: Tesla.
Model S sales trends
After peaking in the fourth quarter of 2015 at more than 17,000 deliveries, Model S sales have been at least several thousand units lower in all but one quarter ever since. In Tesla's most recent quarter, Model S deliveries were about 12,000, or about 5,000 units lower than fourth-quarter deliveries in 2015.
Data source: Tesla quarterly SEC filings and vehicle delivery updates. Chart by author.
The lower quarterly deliveries have coincided with Tesla's ramp-up in Model X deliveries, suggesting the similarly priced SUV has cannibalized some demand for the sedan. Though the Model X was launched toward the end of 2015, the SUV's production and deliveries didn't begin to pick up steam until the first quarter of 2015. And the SUVs deliveries have continued higher, with trailing-12-month deliveries up 450% year over year. In its most recent quarter, the automaker delivered about 10,000 Model X units -- just 2,000 units shy of Model S deliveries in the quarter.
Why a sequential rebound is likely
But despite sales trends that may, on the surface, suggest Model S deliveries will continue lower sequentially in Q3, a sequential rebound is likely.
First of all, both Model S and X deliveries were impacted by what Tesla called "a severe production shortfall" as the company ran into some detours producing its new 100 kWh battery packs. The shortfall was so bad that production during the quarter averaged about 40% below demand until early June, or the last month of the quarter, Tesla said. The elimination of this production constraint should help Model S production and deliveries in Q3.
Second, orders for Model S were increasing "leading up to and following the Model 3 handover event [on July 28]," management said in the company's Aug. 2-released second-quarter shareholder letter.
Third, Tesla made several changes to its product lineup during the quarter that could have helped drive incremental Model S sales. Most notably, Tesla lowered the price of its highest-end Model S units, making the longest-range and fastest-accelerating version $5,000 cheaper. The price cut to models with 100 kWh batteries reflected "cost efficiency improvements of approximately 3%," management told press. In addition, Tesla also warned customers toward the end of the quarter that they would be discontinuing the rear-wheel-drive Model S, which was the cheapest version. The news could have sparked some customers who were on the fence to pull the trigger before they no longer had the opportunity to buy the rear-wheel-drive version.
Image source: author.
Finally, though Tesla didn't break out its expectations for Model S and Model X specifically, it guided for combined Model S and X deliveries in the second half of the year to be above deliveries in the first half. In other words, management clearly wasn't anticipating any production or demand headwinds for either model.
Tesla releases its quarterly vehicle deliveries within three calendar days of each quarter's end. So expect Tesla to report vehicle deliveries no later than Oct. 3.
