Tesla’s stock experienced a drop following disappointing delivery numbers in China.
Decline in Deliveries
According to the Chinese Passenger Car Association (CPCA), Tesla delivered 74,073 units in September from its Shanghai plant. This figure is lower than the approximately 84,000 units delivered in August and approximately 83,000 units delivered in September 2022.
Global Distribution
It is worth noting that the delivery numbers include vehicles exported from China to Europe as well as domestic sales. The volume of cars exported by Tesla varies each month depending on regional demand and production capacity at the German plant.
Monthly Production Update
Considered a monthly production update for the Shanghai plant, the CPCA number is observed closely by investors. While falling production is a concern, it should be noted that Tesla recently introduced an updated version of its popular Model 3 sedan in Europe and China. The United States is also expected to receive an upgraded Model 3 later this year.
Tesla’s Response
Despite requests for comment regarding the timing of the Model 3 release in the U.S., Tesla has not provided a response.
Impacted Sales
The introduction of an upgraded model has inevitably affected sales of older Model 3 sedans. Data analyzed by Citi analyst Jeff Chung, who tracks insurance registration data, revealed that Tesla sold approximately 240 Model 3 sedans in China between September 11th and September 17th. This number is significantly lower compared to the typical figure of 2,000 to 3,000 units sold per week.
Factors Influencing Delivery Numbers
Two key factors contributing to Tesla’s lower delivery numbers in the third quarter are the model changeover and planned factory downtime. As a result, Tesla delivered only about 435,000 units during this period, falling slightly short of Wall Street’s expectation of approximately 455,000 units.
Although facing challenges, Tesla remains dedicated to meeting market demands by introducing upgraded models and optimizing production capabilities.
Tesla Stock Holds Steady Despite Delivery Dip
Investors have shown confidence in Tesla stock, with its value increasing by about 1% since the beginning of September, while the S&P 500 has declined by approximately 4%. The market remains optimistic that this temporary dip in deliveries will be reversed in October and throughout the rest of the year.
Analysts on Wall Street are expecting Tesla to deliver 485,000 units in the fourth quarter, which would bring the year-to-date total to over 1.8 million units, representing a substantial 40% year-over-year increase.
However, Tesla stock faced some weakness on Monday morning, with premarket trading showing a decline of 1.5%, while S&P 500 and Nasdaq Composite futures experienced decreases of 0.7% and 0.8%, respectively.
In addition to the delivery news, Wells Fargo analyst Colin Langan adjusted his Tesla price target to $260, down $5 from his previous estimate. Langan currently rates the stock as Hold.
Langan raises an important question in his report: “Is the pain worth the gain?” He expresses uncertainty about waiting to see the outcome of the fourth quarter. He predicts that lower prices will drive higher volumes but result in thinner profit margins due to reduced prices.
While Langan takes a more pessimistic stance, the average analyst price target for Tesla stock, according to FactSet, is approximately $255, just slightly below its current trading price. It is worth noting that it is not uncommon for Tesla stock to trade above the average analyst target price.
Overall, around 42% of analysts covering Tesla stock rate it as a Buy, compared to an average Buy-rating ratio of about 55% for stocks in the S&P 500.
