After running into logistics challenges in its third quarter as it ramped up production and deliveries of its Model 3, Tesla (TSLA 12.09%) is trying to avoid making the same mistake in Q4. CEO Elon Musk said on Twitter this week that the electric-car company is taking steps to reduce shipping times, which will ultimately beef up deliveries before the quarter ends.
Tesla's efforts to get more Model 3 units in the hands of customers before the end of the year comes as management aims for another record quarter. Will Tesla be able to deliver even more cars than it did in Q3?
Tesla's Model 3. Image source: Tesla.
Acquiring trucking companies
"Tesla just acquired trucking capacity to ensure Model 3 can be delivered in US by Dec 31 if ordered by Nov 30," said Musk in a tweet on Thursday. In a follow-up tweet, Musk clarified that Tesla both purchased some trucking companies and "secured contracts with major haulers to avoid trucking shortage mistake of last quarter."
This is a significant acceleration in the Model 3's delivery time. Previously, Tesla had said the shortest time frame it could ship deliveries to the East Coast from its factory in California was eight weeks. For central U.S. and the West Coast, Tesla had previously promised ship times of four and six weeks, respectively.
Considering Tesla's problems last quarter, it makes sense that the automaker is buying trucking companies. Tesla faced logistics challenges in its third quarter as it ran into "an extreme shortage of car carrier trailers." In addition, a large volume of Model 3 deliveries toward the end of the quarter even prompted Musk to invite current Tesla owners to help educate new owners at delivery centers.
Notably, by shortening the time Tesla needs to deliver Model 3 vehicles in the U.S. before the end of the year, the electric-car company is maximizing the number of vehicles it can ship before buyers miss out on the full $7,500 federal tax credit. The $7,500 credit is set to be halved in 2019 for Tesla customers.
Aiming for another record quarter
But Tesla's effort to improve shipping logistics in the second half of Q4 is likely about more than helping its customers get the full tax credit. It is also likely a by-product of management's goal to deliver even more vehicles in Q4 than it did in its record third quarter.
In Tesla's third quarter, vehicle sales more than doubled sequentially as Model 3 deliveries surged 204%. But management said it expected deliveries to rise even higher in Q4; Tesla guided for a slight sequential uptick in Model S and X deliveries and said, "Model 3 quarterly production and deliveries should continue to increase in Q4 compared to Q3."
Of course, Q4 is about more than vehicle deliveries for Tesla. After swinging to a profit in Q3, the automaker wants to pull off yet another quarter in the black. To achieve this, Tesla's going to need another quarter of high-volume Model 3 deliveries.
