Tesla (TSLA) announced third quarter production and deliveries in-line with guidance this morning.
Third quarter production grew 50% quarter-over-quarter and 217% year-over-year to 80,142 vehicles. Tesla produced 53,239 Model 3 vehicles, in-line with 50-55,000 guidance. Almost all of them were higher-priced dual motor (all wheel drive) vehicles, which the company began producing early in the quarter.
Third quarter deliveries totaled 83,500 vehicles: 55,840 Model 3, 14,470 Model S, and 13,190 Model X. In just Q3, Tesla delivered more than 80% of the vehicles that they delivered in all of 2017, and about twice as many Model 3s as they did in all previous quarters combined.
Model 3 deliveries were limited to higher-priced variants in the third quarter, cash/loan transactions, and North American customers only. There remain significant opportunities to grow the addressable market for Model 3 by introducing leasing, standard battery and other lower-priced variants of the car, and by starting international deliveries.
Demand for Model S and X remains high. In Q3, Tesla was able to significantly increase Model S and X deliveries notwithstanding the headwinds from the ongoing trade tensions between the US and China.
Tesla noted that, taking ocean transport costs and import tariffs into account, Tesla is now operating at a 55% to 60% cost disadvantage compared to the exact same car locally produced in China. This makes for a challenging competitive environment, given that China is by far the largest market for electric vehicles. To address this issue, Tesla is accelerating construction of its Shanghai factory, which they expect to be a capital efficient and rapid buildout, using many lessons learned from the Model 3 ramp in North America.
The overall target of 100,000 Model S and X deliveries in 2018 remains unchanged.
Tesla executed quite well during the third quarter, so now focus turns toward the company's financials.
Tesla is expected to report third quarter results in early November.
Tesla guided for GAAP profitability and positive free cash flow in the second half of the year. Achieving that will go a long way in quieting short-sellers, who have been emboldened by Elon Musk's erratic behavior so far this year.
Elon Musk is forced to step down as Chairman of the Board for three years as a settlement with the SEC over allegedly misleading investors when he tweeted about taking the company private at $420/share -- the infamous ‘funding secured' tweet.
We can assume Elon Musk will appoint a confidant as Chairman but two independent directors will also be appointed to the Board. Improved corporate governance is a step in the right direction for a company where Elon Musk apparently wears almost every hat.
Tesla stock has essentially been consolidating around the $300 level since breaking out eighteen months ago in anticipation of the mass-market Model 3, which is now dominating market share among mid-sized premium sedans.