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Tesla Shares Nose-Dive Despite Record-Breaking Q4 Production Numbers

03 January 2019

Tesla disappointed investors Wednesday, delivering 90,700 vehicles during the fourth quarter, which fell short of Wall Street forecasts despite its efforts to ramp up production.

The news also comes as automakers and analysts expect United States new vehicle sales to weaken in 2019. But the company's ability to sustain a higher level of production - it built 61,394 Model 3s and 86,555 vehicles total in the last three months - will go a long way toward that goal. Still, James Albertine, an analyst at Consumer Edge Research, said Wednesday's selloff represented an overreaction.

Tesla also produced a total of 25,161 Model S and X, which is consistent with its long-term run rate of around 100,000 units per year.

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Tesla reported that 75 percent of the 61,394 Model 3s it delivered during the quarter went to new customers rather than reservation holders, which suggests numerous latter are still holding out for the $35,000 auto. Now, Tesla buyers only get half that credit, or $3,750, for the next six months, before it falls to $1,875 in July.

"The price cut is what's driving the stock lower, as it openly acknowledges the sunset of subsidy dollars is a material headwind", said Craig Irwin, an analyst with Roth Capital Partners.

By the end of the quarter, Tesla had 1,010 Model 3 and 1,897 Model S and X that was in transit to customers, which are expected to be delivered in early 2019. It has yet to produce the base Model 3, which it has promised for a price of $35,000 before incentives. Tesla's own internal tracking shows its deliveries were in line with or above estimates, spokesman Dave Arnold told reporters.

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As of writing, Tesla stock is trading down 7.45% at $308.00 per share.

Tesla shares fell after the electric auto maker delivered fewer-than-expected Model 3 sedans in the fourth quarter and cut prices for all its vehicles in the US. The carmaker also reported fourth-quarter deliveries that fell just short of analysts' estimates.

The company says it produced almost 87,000 vehicles in the fourth quarter, also eight per cent above its previous quarterly record set in the third quarter.

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The company now is moving into an important phase of its business and will have to decide whether to cut production to match what appears to be waning demand, or discount its vehicles to stimulate sales like other automakers do, Gartner analyst Michael Ramsey said.

Tesla Shares Nose-Dive Despite Record-Breaking Q4 Production Numbers