Tesla's (TSLA -2.33%) third-quarter vehicle deliveries were a letdown, thanks to a sequential decline in production. Missing analysts' average estimate for deliveries of about 462,000, the electric-car maker said on Monday morning that it delivered only 435,059 vehicles. Not only was this number far below analysts' expectations, but it was well below Q2 deliveries; Tesla delivered a record 479,700 vehicles during Q2.
While this may be a disappointment for Tesla bulls, there was a silver lining in the report. Despite third-quarter production and deliveries both declining sequentially, the company still went out of its way to reiterate its full-year guidance to build a total of 1.8 million vehicles this year.
A caveat
Before taking a closer look at Tesla's move to reiterate its full-year volume guidance, some concerns over the quarter's underwhelming production and deliveries can be dispelled. Investors were warned well in advance that there would be a sequential pullback in production.
"We continue to target 1.8 million vehicle deliveries this year, although we expect that Q3 production will be a little bit down because we've got summer shutdowns for a lot of factory upgrades," said Tesla CEO Elon Musk during the company's third-quarter earnings call, "so just probably a slight decrease in production in Q3 for sort of global factory upgrades."
The word "slight" of course, was left to interpretation. In this case, it ended up being a 9% sequential decline -- maybe a bit more than the "slight" decline Musk had hoped for. But anyone following auto stocks knows that predicting the impact of factory shutdowns and subsequent reopenings is no easy task. That's why the range of analyst estimates headed into the report was as wide as it was.
Investors, therefore, shouldn't be too quick to bolster their bear case for the stock based on this week's update from the company. After all, Tesla's worse-than-expected third-quarter deliveries were due to planned pauses in production at its factories.
The bull case
On the contrary, it may make sense to be even more bullish on the growth stock given the new information provided in the update. The fact that Tesla is reporting worse-than-expected third-quarter production and deliveries yet is still aiming to build the 1.8 million vehicles it set out to build at the beginning of the year is a testament to the strong tailwinds powering Tesla's business.
Putting Tesla's full-year guidance to build 1.8 million vehicles into perspective, it represents more than 31% growth over Tesla's 2022 vehicle production. Making this growth particularly impressive, Tesla expects to achieve it despite a high interest rate environment and an uncertain economy.
In a nod to the bear case for Tesla stock, the company has lowered its vehicle prices substantially from where they were last year in order to keep fueling its growth. But the material market share gains Tesla has made during this period will likely be worth it over the long haul.
All things considered, management's move to reiterate its volume guidance with only three months left in the year suggests that the secular tailwinds behind the company's growth likely remain intact, positioning the company well for Q4 and beyond.
