Tesla (TSLA) Stock Rebounding From Bad First Quarter

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by Teuta Franjkovic · 3 min read
Tesla (TSLA) Stock Rebounding From Bad First Quarter
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Tesla (TSLA) delivered 95,200 of its electric vehicles in the second quarter, a dramatic reversal from a disappointing first period that set a new record and beat analysts’ expectations.

Tesla (TSLA) seems to be profitable again. The company just announced that it made and delivered a record number of cars in the second quarter of 2019. The electric automaker produced 87,048 vehicles in the quarter, and delivered “approximately 95,200,” after having finished the first quarter of the year with some 10,000 cars listed as “in transit.”

72,531 of the total cars produced were Model 3s and there was 77,550 Model 3s in the quarter.

Nobody expected these kind of numbers. The most optimistic analysts expected closer to 91,000 deliveries this past quarter. The best quarter Tesla had was in 2018.

However at the time of writing, TSLA stock went through a correction of 1.15% at $224.55.

North America is one of the Tesla’s biggest market but it seems nobody believed Tesla could beat its previous record of 90,700 deliveries globally. However, let’s just mention that in China and Hong Kong, Tesla is extremely popular vehicle. Over the past five years, Hong Kong has turned into an unexpected hub for the world’s best-known electric car.

Theo Valich CTO, IAMA & FIP says that the key to profitability in every industry is to scale up production to the point where gross margin outweighs all the costs. Talking to Coinspeaker he said:

“Second quarter of 2019 saw Tesla delivering 95,200 vehicles, almost twice as much vehicles than in the same quarter of 2018. For comparison, Tesla manufactured 101,027 vehicles in all of 2017. When we look at Tesla and SpaceX, it is very clear that by adopting the simulation models to scale their production had its pains in achieving correlation between computer design and real world. Once achieved, Tesla began an ultimate ramp up which is outpacing the automotive industry. “

He added that the rapid build-up of GigaFab 3 in Shanghai could see Tesla delivering more cars on a quarterly basis by Q4 2020 than in all of 2018:

“Market indicators are quite clear – YoY demand for Model 3 grey by massive 320%, while the vehicle hasn’t even launched in all the markets. Good example is the recent launch of the right wheel drive variant. 75 countries drive on the left, and Model 3 was unable to address this opportunity until the current quarter (Q3 2019).

Upcoming arrival of its SUV version called Model Y should see profitability improving even more, as SUVs became de facto the golden standard for the car industry. With the rapid expansion of production, the cost of all materials (BoM) is coming down, supply chain is becoming more efficient and profitability is all but guaranteed.

Gene Munster from Loup Venture’s says that this is not pent-up demand but rather an indication of the underlying strength of Elon Musk’s company. He shrugged off concerns about the departure of many talented individuals from Tesla’s board.

The thing is that if Tesla is going to survive in the increasingly competitive electric vehicle market, Musk will then be able to continue to scale the business with rising demand. Car manufacturing is a very low margin business. Understanding this, it makes the following statement from Tesla’s production report particularly meaningful, Muster said:

“We made significant progress streamlining our global logistics and delivery operations at higher volumes, enabling cost efficiencies and improvements to our working capital position.”

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Teuta Franjkovic

Experienced creative professional focusing on financial and political analysis, editing daily newspapers and news sites, economical and political journalism, consulting, PR and Marketing. Teuta’s passion is to create new opportunities and bring people together.

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