After Shattering Expectations, Can Tesla Meet Its Demand?

In this segment of "3 Minute Stocks Updates" on Motley Fool Live, recorded on Jan. 5, Fool contributor Toby Bordelon takes a look at what Tesla (TSLA -3.40%) needs to do to fulfill the growing demand for its cars.

Toby Bordelon: Let's talk about Tesla. This is always a fun one. Earlier this week, Tesla reported delivery numbers for the fourth quarter of last year, and they hit another record. Another record delivery, 308,000 cars delivered in Q4, which was a 71% increase over Q4 2020.

I see Brian dancing for joy there. I'm sure he's overjoyed by this being a shareholder. The total for 2021, 936,000 cars, which was an 87% increase from 2020. This far exceeded analysts' expectations. Analysts were looking for 266,000 cars from Q4 and 855,000 for the year. This was well above that level.

Almost all these models were 3 and Y, so we're talking about the lower-end car, but still good margins there. The stock went up, not surprising. When you exceed expectations by that amount, not surprisingly, your stock goes up.

I was a little bit surprised by these numbers, and the reason is because if you will recall, we looked at the Q3 report on "Beat and Raise", I believe, maybe you talked about it on this show, I noted that the annual production capacity was a little over a million cars a year. That's what they were telling us. That's with their numbers, not something we came up with. They said in their report, here's our capacity.

The Q4 number is 308,000 per quarter. If you were to annualize that out, you're over 1.2 million. That's a little bit above where that capacity number was, around a little over a million cars a year. These numbers suggest they're at capacity or they're very close to it. I didn't think we would get there this fast. It's possible they're getting more cars out of Shanghai when they showed us that traffic capacity they said Shanghai was greater than.

As they continue to build up that plan, you can see how they can get more out of there. I'm not sure if that was the case, but looking at what they've told us, I honestly don't think we should expect to see a big quarter-over-quarter jump in Q1 unless we get new capacity soon, unless Texas comes online in a big way probably in the next couple of weeks to start making these cars for Q1.

Tesla's problem right now, guys, is not demand. Despite what some skeptics and conspiracy theorists might have you think, they do not have a demand problem. I think that's pretty clear. Their issue when I look at this business is supply. That's the single biggest issue for them, and I think in 2022, they need to focus on getting the Texas and Berlin factories operational and producing at scale to solve these demand problems.

Also, thinking ahead, figure out where their next factory is going to be because it's pretty clear they're growing very rapidly. Supply problems are a better problem to have the demand problems for sure, but it's still a problem we need to solve.

The only thing to note here, there were some controversies this week. Tesla opened a showroom in the Xinjiang region of China where there are accusations of slavery and genocide. A lot of stuff in the media about that beating them up over that, criticizing them.

Tesla is not unique. We've seen other companies face issues, particularly in China. How you do business globally while navigating the political and controversial issues? How do you bring your products to everyone who wants them while being sensitive to issues that might exist in these countries? Especially countries with governments, let's say less ideal than we might like them to be.

I don't know if there is a perfect solution, but they'll have to figure out a way forward as many companies have. I'll just close by giving a quick update. As great as Tesla has been, fascinatingly, Ford (F 6.10%) stock outperformed Tesla stock in 2021. That's something interesting to note.

The F-150 is going to beat the Cybertruck to market. I think that's a near certainty at this point. They're targeting early spring with their first vehicles and Elon Musk is saying 2023 for the Cybertruck in a big way.

Then we just got news today, GM (GM 1.98%) announced their electric truck is coming to the market, Silverado. I think Tesla needs to get that truck out soon if they want to stay competitive, but again, they need more capacity. They need Texas operational to really make that happen.

Good news from Tesla, but they got work to do on expanding this capacity for building the cars that people want to buy.