Shares of Tesla Inc. spiked this week on news that the company had set a record for quarterly deliveries. The news came as a crushing rebuke to critics who had been questioning whether or not there was sufficient demand for the company’s luxury electric cars. Tesla continues to be silent on overall profits for the quarter but investors seem bullish on the company which has seen its share of ups and downs in recent months. Before this latest increase in price, shares of Tesla were down by roughly a third since the beginning of the year. Tesla also said that orders exceeded deliveries during the second quarter of 2019, a good sign for any automotive company.
In spite of the federal tax credit for electric vehicles being slashed from $7,500 to $1,875 earlier this week, sales of Tesla’s vehicles seem to be holding strong. The tax credit is set to fully expire at the end of 2019. In a prepared statement, Tesla declared that “We believe we are well positioned to continue growing total production and deliveries in Q3.” Tesla managed to deliver over 77,000 Model 3 cars during the quarter, beating the average expectations of analysts by about 2,000 units. The company’s business model has been largely reliant on their newer and more affordable sedan to spur growth. By comparison, Tesla sold 17,650 units of their S and X models combined during this same time period.
The good news could not have come at a better time for Tesla. A tumultuous fist quarter of 2019 saw massive logistics issues for the company and let to a $700 million decrease in value. Investors worried that the luxury electric car market was too small and began to panic, causing a massive sell-off of stock. Still, Wall Street insiders remain skeptical. One analyst speculated that the boost in deliveries was caused by customers eager to purchase an electric vehicle before the expiration of the federal tax credit and warned against counting on similar results for the third quarter of 2019. Tesla aims to deliver 400,000 vehicles in 2019, a goal that will no doubt be difficult to meet.
In addition to deliveries, overall production of Tesla’s vehicles also rose by a respectable 13% compared with the first quarter of 2019. The company built approximately 72,500 Model 3 sedans in the second quarter, up from approximately 63,000 in the preceding quarter. While production capability has not historically been an issue for Tesla, issues with logistics certainly have. One of the largest challenges the company has faced is overcoming the hassles that come with delivering vehicles to customers around the globe. Previously, Tesla’s strategy was to temporarily re-assign employees from all departments of the company to handle deliveries. This method proved to be costly and ultimately unproductive. Tesla claims to have conducted a complete overhaul of their logistics methods in order to maximize profit margins per unit. Whether due to expiring tax credits or improved logistics, the company does appear to be headed in the right direction.
What do our readers think? Will Tesla continue to beat the expectations of Wall Street? Will the Model 3 continue to be Tesla’s best selling car or will the upcoming Model Y take its place? Please leave a comment and let us know.
Source | Image: Tesla