Tesla Literally Fails To Deliver On More EVs, Sends Share Price Plummeting

Key takeaways

• Tesla missed Wall Street delivery expectations by a wide margin
• Chinese EV rival BYD has now overtaken EV deliveries from Tesla for the first time ever
• Tesla’s share price dropped as much as 2.8% during premarket trading, but recovered

Tesla, one of the world’s largest EV makers, has fallen short of delivery targets. Tesla warned us this would happen months ago, but Wall Street wasn’t expecting such a major drop, which sent the share price tumbling in premarket trading.

Even though the results put Chinese rival BYD ahead on deliveries for the first time, traders clearly didn’t think Tesla’s delivery news was too bad. The stock actually closed higher by the end of the day – perhaps that’s to do with Tesla’s ability to bounce back after a rough quarter.

Here’s the lowdown on the Tesla delivery figures, how BYD has snatched the crown away for the first time, and whether Tesla has a chance to recover.

What’s happened with Tesla’s deliveries?

Tesla’s deliveries for the third quarter were through the floor, it was revealed on Monday. Billionaire and Tesla CEO Elon Musk had already warned that a drop-off in deliveries was on the horizon in July, as he said the Shanghai and Austin, Texas factories were temporarily shutting down for refurbishments, but the decline was worse than feared.

Tesla produced around 430,000 vehicles for the quarter, which is a drop of 49,000 units from the 479,700 produced in Q2. As for deliveries, these also fell by around 7% compared to the record 466,140 EVs Tesla delivered in the second quarter after the price cuts had their intended effect.

Still, the quarterly figures were decent when you compare them to the same time last year. Production has jumped 17.6% in that time, while deliveries have climbed 26.5%. A bright spot in the report was that sales exceeded production, meaning inventories have shrunk for the first time in Q1 2022.

Tesla still expects to deliver 1.8 million vehicles in 2023, leaving it with 475,000 to deliver in the quarter to hit the target. Around 20,000 EVs were already pushed back into the quarter due to production delays, but Wall Street predicts Tesla will deliver 490,000 EVs in Q4.

Tesla’s pricing wars strategy

Musk took a gamble with the company’s pricing strategy this year after recognizing the global industry had a price problem. In the U.S., the average new gas vehicle costs $12,000 less than a new EV, which averages $61,000.

In the spring, Tesla slashed the prices of some of its more expensive models in the U.S. so customers could take advantage of a new $7,500 EV tax credit the government introduced. They were hefty discounts, too: the Model Y long-range version was slashed by a quarter to $50,490.

Since then, Tesla has introduced more discounts in the U.S., Europe and China to compete with its rivals, especially BYD. Investors questioned whether it was the right approach, but the results were clear in Tesla’s second-quarter earnings in the summer.

Revenue from Tesla’s core automotive business rose 46% from last year to $21.27 billion as customers flocked to take advantage of the bargains. However, Tesla’s quarterly automotive gross margin fell to 18.1% from 19% the previous quarter, which some investors feared.

The price cuts have pressured Tesla’s bottom line, but Musk has said he’d prefer to sacrifice margin to drive volume growth. “We’re in, I would call it, turbulent times,” the CEO said during a conference call in July. (That comment sent Tesla’s share price down 5% at the time.)

BYD takes the EV crown

In more bad news for Tesla, its Chinese rival BYD has now topped the EV maker’s production numbers for the first time ever. In September, BYD produced 280,000 “new energy vehicles”, up from 205,000 the same time last year.

Since “new energy vehicles” also mean hybrid cars, what about pure EVs? BYD produced 144,000 of them in September, which has climbed a massive 81% since last year. That means BYD produced 440,000 new battery EVs for the quarter, which has skyrocketed 67% from 2022.

With these latest figures, Tesla has officially lost its production crown. The company produced 430,488 battery EVs in the third quarter, which is an 18% climb from last year.

But in the eyes of the public, Tesla is still the poster child for EVs. BYD’s market is mainly in China, where it’s the country’s biggest maker and seller of battery EVs. Tesla has a far greater global presence, especially in the U.S.

It’s also worth noting that Tesla still has the edge on yearly production, having manufactured about 1.8 million battery EVs compared to BYD’s 1.4 million. Tesla is still ahead on deliveries, but only just: the EV maker delivered 435,059 units in the third quarter, while BYD delivered 431,603.

How did the markets react?

In premarket trading on Monday, Tesla stock dropped by as much as 2% but then recovered and ended the trading day 0.45% higher. Tesla’s share price has soared 128% since the start of the year.

Investors are holding out that the newly revamped Model 3 in Europe in China, a slightly upgraded Model Y for the Chinese market and the much-anticipated Cybertruck will be the boost to sales Tesla needs. Not to mention, investors had been forewarned about Tesla’s factory refurbs impacting the figures this time around.

What else is happening with Tesla?

Tesla has now become part of a massive EU probe into whether subsidies going to Chinese automakers are impacting the European domestic market. The European Commission launched the probe earlier this month, which wants to determine how much the likes of Tesla, BYD, SAIC, and Nio have been subsidized by China.

The probe can potentially reshape the EV landscape in Europe, which is the world’s second-largest EV market after China. Europe has been a pipeline for Chinese EV makers with excess stock, with Tesla selling an estimated 93,700 made-in-China EVs across Western Europe in the first half of the year. The company has a manufacturing plant in Shanghai, which it refers to as its primary vehicle export hub.

Tesla has undoubtedly benefited from special treatment in China, as the company doesn’t need to pair with a domestic joint venture partner – Tesla owns its operations there entirely. Considering the numerous tax breaks and loans the EV maker has also been given, you can see why the EU is worried.

China isn’t exactly happy with the probe, with Beijing calling it “a naked act of protectionism.” The EU’s car industry supports over 14 million jobs either directly or indirectly, and it wants to protect them – so the outcome could be import taxes designed to offset the subsidies. Tesla’s stock fell 1.6% last week at the news.

The bottom line

Tesla was pretty clear about its lowered delivery output ahead of time, so Wall Street was ready for bad figures – but the premarket drop shows traders weren’t quite ready for such a big hit to Tesla’s deliveries.

For Musk and Tesla, it’s no big deal – the factories are back up and running, the price cuts have largely worked, and newly refreshed Tesla models are coming into the mix. It’s only a matter of time before Tesla regains its delivery crown from BYD.