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Tesla (TSLA) is speeding to its highest levels since mid-January after reporting better-than-expected Q2 vehicle deliveries of 444,000, easing fears that rising competition in China and tepid demand for EVs took an even worse toll on the company. However, on a yr/yr basis, Q2 deliveries did decline by nearly 5%, after falling by 8.5% last quarter, indicating that these headwinds haven't abated. Furthermore, in order to achieve the upside deliveries number, TSLA had to rely on more price cuts and incentives to help stimulate demand.

• In April, the EV maker lowered its prices on Models Y, X, and S, and it also reduced the price of its full self-driving (FSD) system by 33% to $8,000. TSLA's eroding automotive gross margin metric has been a focal point over the past several quarters and with these latest price cuts, it will be once again when the company reports Q2 earnings in a couple weeks. In Q1, TSLA's automotive gross margin skidded to 16.4% compared to about 19% in the year-earlier quarter, mainly due to lower ASPs.
• The disappointing start for Cybertruck, which currently is only available for sale in its most expensive version, has also weighed on the stock. TSLA didn't break out specific delivery numbers for Cybertruck in this morning's report, but based on recalls announced in June, it appears that TSLA has sold roughly 11,000 Cybertrucks since the official launch on November 30, 2024. That's a relative drop in the bucket still compared to the 422,405 Model 3 and Model Y's that TSLA delivered in Q2 alone.
• TSLA is badly in need of a new vehicle that can help reinvigorate its brand and slow the market share gains that its Chinese competitors have been achieving. On that note, China-based EV makers NIO (NIO), Li Auto (LI), and XPeng (XPEV), reported impressive June deliveries data yesterday. While the strong results showed that demand for EVs in China has strengthened recently, they also suggested that these Chinese competitors are only becoming a more formidable threat to TSLA. 
• On the positive side, TSLA confirmed last quarter that its mass-market Model 2 vehicle is still in the works and that its ready to accelerate the launch of new models ahead of its previously communicated start of production in 2H25. A reiteration of that timeline will be critical when TSLA reports Q2 earnings.

The main takeaway is that TSLA's Q2 deliveries were better-than-expected, marking an improvement over Q1's sizable miss, and easing fears that demand has taken a turn for the worse. TSLA is still facing significant hurdles, such as rising competition, and that is also evidenced by the fact that deliveries were again lower on a yr/yr basis.