Tesla Reports Record Q3 Deliveries; Blow Out Quarter Secured
Deliveries topped 241,000, trouncing market consensus & my best case estimate. It was an easy comp vs weak results last year on new model & market expansions. But how much of the beat was home grown?
Tesla (TSLA) surprised investors on Saturday by reporting a stunning 241,300 deliveries for the third quarter, up 20% versus the second quarter and up 73% y/y. This easily beat market consensus of roughly 224,000 and my best case estimate of 220,317.
Deliveries of Models 3+Y were 232,025, up 87% versus last year. As expected, most of the growth can be traced to new market expansions into China and Europe with Model Y and continued ramp-up of Model Y in the US.
This quarter also was another easy comp versus terrible Model 3 deliveries in the US last year, as I have highlighted in previous reports. Remember US Model 3 sales last year were down 68% y/y in Q2, down 38% y/y in Q3, and down 37% in Q4 as the newly launched Model Y gained traction.
Since Tesla doesn’t break out numbers for Models 3 & Y we’ll need more industry data in coming weeks to determine if run-rate and same store Model 3 deliveries have stabilized, something Tesla’s legacy models have struggled with for years.
Indeed, MIC Model 3 deliveries in China were tracking lower y/y all during the third quarter versus expanding sales of MIC Model Y, which launched in the first quarter. I anticipate a similar pattern to develop in Europe now that Model Y has been introduced there as of August:
This, as I have noted before, is the same pattern I’ve been tracking for years. Sales in Tesla’s legacy models have faded almost immediately when faced with its new models, and now Tesla is facing stiff new competition from strong rivals in all its markets—especially China. Its new models have also struggled to sustain sales after initial new launch and/or new market expansions even before the first anniversary of said events (I last discussed this at length in Tesla: Don’t Drive Angry).
Tesla's August Sales Numbers in China Don't Add Up
Third quarter deliveries were slightly higher versus 228,882 produced, up 79%, which suggests supply constraints may have whittled sales.
That said, Tesla still appears to be faring far better versus most major automakers which have reported substantial sales shortfalls all year due to shortages of chips, raw materials, and key components.
General Motors (GM), for example, reported on Friday that deliveries fell 33% y/y in the third quarter after it was forced to shut down production for a month on supply chain disruptions. Ford (F) nd Stellantis (STLA), and likely other major OEMs, also experienced substantial shortfalls on similar pressures—a definite competitive boon for Tesla while it lasts, at least through year end.
Strong Models 3+Y deliveries easily offset weaker than expected deliveries of Models S+X which dropped 39% y/y to 9,275 on continued production issues with their long overdue new version rollouts. This likely trimmed the margin contribution of these expensive models versus potentially similar to slightly higher average pricing y/y.
Bigger Numbers Mean Bigger Numbers
With third quarter numbers topping my best case estimate by roughly 10%, I have increased my revenue and profit estimates. Assuming Tesla can hold similar average pricing and margins seen in the second quarter, I now estimate third quarter revenue at $14 billion (up 60%) and EBITDA at $2.93 billion (up 62%). If so, leverage could drop to 1x-1.2x on stronger EBITDA and lower debt following Tesla’s repayment of its 5.3% senior notes in August.
With nine-month deliveries now indicated at 627,481, Tesla should easily exceed its guidance to top 750,000 for the year. Still, I’m not yet ready to revise my fourth quarter estimates which assume a base case of roughly 255,000 deliveries—now 881,000 for the year.
Tesla got a lot of breaks in the third quarter across most markets with so many of its largest competitors more severely impaired by supply disruptions. But where it was on equal footing with strong local competitors, as in China—the largest EV market in the world—Tesla’s sales and market share lost ground.
We’ll see.
Tesla repurchased its 5.3% senior notes in the third quarter as I projected, though I doubt we’ve seen the last of Tesla as a bond issuer:
Now stay tuned for the second step I described: a quickly shopped, likely $2-4 billion inordinately low coupon bond deal, accompanied by a bump in credit quality ratings potentially to low investment grade (see Tesla's Car Business Finally Turned A Profit. Really. Time For A Big Bond Deal). It could even be appealing... if it’s priced at 100 bps or better.
Tesla's China Sales and Market Share Continued to Shrink In AugustUntil then, I have Tesla: Not Rated.
“Don’t Believe Me, Just Watch,” Uptown Funk/Bruno Mars & Mark Ronson
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