Check out the latest Tesla earnings call transcript.

Tesla (TSLA 2.73%) said that it delivered 90,700 vehicles in the fourth quarter of 2018, 8% more than in the third quarter and a new record for the company. But deliveries of its Model 3 sedan fell slightly short of Wall Street's consensus expectation, as reported by Bloomberg. 

The company also announced that it has cut prices of all three of its models by $2,000. Between the price cut and the Model 3 deliveries miss, investors were unimpressed. Tesla's stock opened the first trading day of 2019 sharply lower.

A red Tesla Model 3 Performance, a high-performance electric compact luxury sedan.

Tesla said that deliveries of the Model 3 rose 13% in the fourth quarter. Image source: Tesla.

Tesla's fourth-quarter sales and production: The raw numbers

Vehicle Q4 2018 deliveries Change vs. Q3 2018
Model S 13,500 (6.7%)
Model X 14,050 6.5%
Model 3 63,150 13.1%

Data source: Tesla. 

Tesla produced 61,394 Model 3's and a combined total of 25,161 Model S's and Model X's in the fourth quarter, up 15% and down 6.4% from the third quarter, respectively.

In addition to the totals delivered, another 1,010 Model 3's and 1,897 Model S and Model X vehicles were "in transit" as of the end of the fourth quarter, Tesla said. (This seems to be Tesla's way of disclosing inventory. The totals are down significantly from the end of the third quarter, when nearly 12,000 Teslas were "in transit.") 

A black Tesla Model X, a 7-passenger luxury SUV.

Sales of Tesla's Model X SUV rose 6.5% in the fourth quarter. Image source: Tesla.

What Tesla said

In addition to the delivery and production figures, Tesla's press release included a few items of note:

  • Tesla pointed out that Q4 Model 3 deliveries were limited to "mid- and higher-priced variants," as the much-talked-about $35,000 Model 3 isn't yet in production. All deliveries went to customers in North America, and all were purchasers -- Tesla hasn't yet offered a leasing option on the Model 3.  
  • Tesla said that it will begin delivering Model 3's to customers in Europe and China in February. Deliveries to other markets, including those requiring right-hand drive, will begin "later in 2019." 
  • Although Tesla has repeatedly said that it has a long list of reservations for the Model 3, it said that more than 75% of Model 3 orders in the fourth quarter came from new customers, not reservation holders. 
  • As mentioned above, Tesla has reduced the price of all U.S. models by $2,000. 

What's that price cut about?

Why did Tesla feel the need to cut prices after a record quarter? I think there are a couple of explanations. 

First, as Tesla noted in its press release, the U.S. federal tax credit available to Tesla buyers fell by half as of January 1, from $7,500 to $3,750. Under U.S. law, the electric-vehicle tax credits available to a manufacturer's customers begin to phase out two quarters after that manufacturer sells its 200,000th qualifying vehicle in the United States. 

Because Tesla hit that number in July, tax credits available to its U.S. customers are phasing out:

  • Americans who buy Teslas in the first half of 2019 get a tax credit of $3,750;
  • Buyers in the second half of 2019 will get a credit of $1,875;
  • Buyers after that get no federal tax credit. 

That's the official reason for Tesla's price cuts. But there's almost certainly a second, related reason: Tesla is worried about demand -- worried enough that it felt the need to take a hit to its margins in order to partially offset the declining tax credit. 

Why would Tesla worry about demand? There's a hint hidden in its press release -- that more than 75% of fourth-quarter orders for the Model 3 came from new customers. That suggests that a large portion of Tesla's much-touted backlog of reservations for the Model 3 hasn't yet converted into sales. It's possible that many or most of the remaining reservations are awaiting the promised $35,000 Model 3 variant, are from outside North America, or both. 

It's also likely that Tesla, like just about every other automaker in the world, is reading the economic tea leaves, seeing a recession in the maybe-not-so-distant future -- and wants to keep sales strong for as long as possible.

What's next for Tesla?

We'll learn more about Tesla's fourth-quarter effort when the company reports its fourth-quarter and full-year 2018 earnings. Tesla hasn't yet announced the date for that report, but it's likely to happen in early February.