Tesla Defies Industrywide Slump, Meets Delivery Guidance

  • Tesla has released Q4 and 2015 delivery numbers that have both exceeded the low end of its guidance.
  • This has put to rest intense investor skepticism regarding whether the company would be able to achieve this.
  • How does this bode for Tesla's ambition to one day become a mass producer of EV vehicles?

Tesla stock has rallied strongly over the last three trading sessions and closed the year solidly in the green with a 7.9% gain on speculation that Tesla will meet its delivery target. On Sunday Tesla (NASDAQ:TSLA) announced that it had managed to exceed the low end for the fourth quarter and full-year 2015 delivery guidance. Prior to the rally Tesla stock had lost 20% during the second half of 2015 as investor skepticism about whether Tesla could achieve its rather lofty delivery targets grew. Tesla reported that it delivered 17,400 vehicles during the pivotal fourth quarter, including 208 Model X cars, thus exceeding its low end guidance of 17,000 for the quarter. Total deliveries for 2015 clocked in at 50,580 units surpassing its low end guidance of 50,000 vehicles delivered during the year.
TSLA stock chart

Source: Tesla Stock Price Data by amigobulls.com

It’s important to take note of the fact that the number of vehicles Tesla sold during the fourth quarter represent a huge ramp of 57% above the company’s average of ~11,000 deliveries/quarter over the first three quarters of the year. Also worth noting is the fact that Tesla reported that it build 507 Model X during the last few weeks of the quarter, which points to an exponential ramp of 238 vehicles built per week, or ~12,300 per year. Tesla is likely to continue growing its Model X production rate, and it won’t come as a surprise if Tesla manages to produce 20k vehicles in 2016.

Tesla’s Mass Production Plans Remains on Course

Tesla’s latest set of delivery results seems particularly encouraging when viewed against the backdrop of how badly EV sales by other manufacturers have been badly battered in 2015. Nissan, General Motors, and Toyota are some of the largest EV manufacturers that have all recorded double-digit declines in EV sales in 2015. Low oil prices have been acting as a disincentive for people to buy EVs and these manufacturers have been feeling the heat. Tesla, however, has been defying this industrywide trend which speaks volume about the strength of the brand. Tesla’s 2015 deliveries mean that the company sold 51% more vehicles in 2015 than it did in 2014.

As I had mentioned before, there has been a lot of investor skepticism regarding Tesla’s ability to hit big production numbers and eventually become a mass producer of EV vehicles. Perhaps this has something to do with the fact that Tesla has repeatedly delayed the launch of Model 3, the company’s first vehicle to be slated for mass production, for three years. This time, however, Tesla remains confident that it can unveil Model 3 as early as March this year.

Tesla’s CEO is on record saying that the only way the company can become profitable is by increasing its production rate and selling many more vehicles than it currently does. In fact Elon Musk projects that Tesla won’t be able to become consistently profitable until the company can achieve production of at least 500,000 units per year. At current growth rate, it would take Tesla something like seven years to hit that level of production.

But Tesla hopes that by launching a cheap Model 3, it can ramp up sales sharply and achieve that target by 2020. Tesla plans to sell Model 3 for ‘‘just’’ $35,000 compared to $80k for base Model X and $70k for base model S. Tesla has been very successful as a high-end EV seller. But it remains to be seen how Tesla will perform once it lowers its sights and targets the lower-end of the market.


The one thing Tesla has going for it is its powerful brand recognition. Despite numerous reports about reliability issues with some of Tesla’s models, Tesla enjoys a very high trust score of more than 90% with its consumers, the highest rating in the auto industry. Tesla’s strong brand will very likely help the company achieve its ambition to become a mass producer of EVs. Telsa's latest set of results prove that Tesla remains very much on track to achieve this target. This makes Tesla stock a good long-term investment.

Brian Wu Brian Wu   on Amigobulls :
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