Fears Of Tesla's Magic Fading Have Intensified With Newest Delivery Figures

Although Tesla Inc TSLA made new records with both the fourth quarter and full year deliveries, EV pioneer’s figures came below analyst expectations.  

Q4 figures

For the three months that ended in December, production amounted to 439,701 vehicles, while 405,278 vehicles were delivered. According to the Financial Times, Wall Street analyst were expecting deliveries to reach 420,000 to 430,000.

However, it is important to note that The Tesla Semi was not included in the list, even though its first deliveries took place in early December.

In an effort to boost demand, Tesla offered steep price cuts and other promotions during the quarter, consciously thinning its margins.

2022 figures

With this in mind, full year production amounted to 1,369,611 vehicles with 1,313,851 deliveries which also came below analyst expectations of 1,325,161 deliveries. But these are still new records, with deliveries growing 40% YoY and production increasing 47% YoY. As a reminder, deliveries are the closest approximation of sales that electric vehicle maker discloses.

A year defined by challenges

Throughout the year, Tesla struggled with production, supply and overall logistics challenges with COVID causing suspending and reducing production at its Shanghai factory. Despite these headwinds, the EV maker continued transition towards a more even regional mix of vehicle builds which again led to a further increase in cars in transit at the end of the quarter. Two new factories in Texas and Germany kicked off this year, with production ramping up in California and Shanghai. Unfortunately, the company does not disclose numbers by region. 

More challenges

Along with Musk’s acquisition of Twitter that raised many concerns, South Korea’s Fair Trade Commission stated on Tuesday it will fine Tesla Inc. $2.2 million for violating the advertising law. According to the released statement, the EV maker allegedly exaggerated the driving range and charging speed of its cars, as well as the estimated savings on fuel costs, failing to tell its customers about the shortest driving range of its vehicles in low temperatures. Tesla did change the advertisement on its Korean website in February when the antitrust regulator started the investigation. By the end of September, Tesla made it to be the third-biggest green car brand in the region, owning 13% of local market share of 13%, following Hyundai Motor Company HYMTF and Kia Corporation.

The shares drama

Over the last six months, Tesla’s shares of Tesla tanked by more than 45% and as much as 54 per cent in the final quarter of 2022 as investors got concerned. However, in his email to Tesla’s staff, Musk encouraged employees not to be worried by “stock market craziness.” What added even more wood to the fire was when Musk sold more of his Tesla stock, altogether getting rid of $23 billion worth of stock this year, much of it after he pledged in April to stop selling shares to finance his acquisition of Twitter.

Even some of his supporters got worried that Tesla stayed without a CEO while fearing that the company’s high growth and expanding profit margins came to an end as several analysts expressed their concern about the weakening demand for Tesla’s models, which are relatively expensive compared with an increasing number of competing hybrid and all-electric vehicles. 

Spell is broken?

The above-described disappointments have only strengthed fears that higher interest rates and economic slowdown will cripple demand as Musk warned in December of a storm ahead in a climate of what he described as excessive monetary tightening to tame inflation. 

On a bright note, Tesla is well positioned to reap the benefits of Biden’s Inflation Reduction Act this year, which includes incentives for domestic production and purchases of fully electric cars that are expected to represent a significant boost. To be eligible for the credit, the car’s battery must meet a minimum threshold of parts sourced from the U.S. or at least countries with which the U.S. has a free trade agreement. Like its EV peer, Rivian Automotive Inc RIVN, both CEO Elon Musk and CFO Zachary Kirkhorn are confident that Tesla will meet this standard, putting the company in a favorable position to reap significant benefits, both for its solar and EV business.