Tesla has posted its second-quarter vehicle production and delivery numbers for 2024, surpassing Wall Street expectations and driving a significant increase in its stock price. The electric vehicle (EV) maker delivered 443,956 vehicles in the second quarter, exceeding the analyst consensus estimate of 439,000. This marked a 14.8% increase from the first quarter's 386,810 deliveries but a 4.8% decrease from the 466,140 deliveries reported in the same period last year.
The company's stock rose more than 8% in early trading following the announcement. Before this, Tesla shares had been down 16% in 2024, despite a 6% rally on the previous Monday.
Deliveries, which Tesla groups into two categories-Model 3 and Model Y vehicles, and all other vehicles-are considered the closest approximation of sales disclosed by the company. Tesla's current lineup includes the popular Model Y crossover utility vehicles, Model 3 sedans, the new Cybertruck pickups, the Model X SUV, and the flagship Model S sedan.
Tesla's second-quarter performance beat Wall Street's expectations despite several challenges, including temporary factory shutdowns due to an alleged arson attack at its German factory and shipping delays caused by conflicts in the Red Sea. These issues contributed to an 8.5% drop in first-quarter deliveries and a 13% year-over-year decline in revenue for the same period.
The drop in sales was also linked to Tesla's aging vehicle lineup, increased competition from other EV makers, particularly in China, and brand erosion partly attributed to CEO Elon Musk's controversial public statements. In response to these challenges, Tesla has offered a range of discounts and other incentives to spur sales. For instance, the company is currently offering a zero-interest loan in China as an incentive for customers to buy a Model 3 or Model Y by July 31. China represents a significant market for Tesla, generating approximately $21.75 billion in revenue in 2023, or 22.5% of its total sales.
Colin Langan, an analyst at Wells Fargo, remains cautious despite the recent positive delivery report. He issued a report on Monday highlighting the firm's concerns about "declining delivery growth driven by lower demand & diminished return on price cuts." Langan recommended selling Tesla shares, anticipating a fall in automotive gross margins due to the likelihood of more price cuts and lower volumes as the year progresses.
Investor focus will now shift to Tesla's second-quarter earnings report, expected later this month, and a separate marketing event in August, where the company plans to reveal its design for a dedicated robotaxi or "CyberCab."
Despite the challenges, the increased sales and production numbers indicate a positive trend for Tesla. The company produced 410,831 vehicles in the second quarter, supporting the delivery figures. However, the rising inventory and competition remain concerns for the company's long-term growth.
Tesla's Q2 report comes amid a challenging period for the EV market, with high competition, particularly from Chinese manufacturers. During a shareholder meeting last month, Musk acknowledged the tough market conditions, noting that near-term demand and sales would continue to struggle as the industry transitions.
"Flattening EV adoption in the US and EU, with aggressive competition in China leave little immediate levers to pull to increase volumes," wrote Colin Langan and his team from Wells Fargo, who have an Underweight rating on Tesla stock with a $120 price target.
