Tesla just reported ground-shaking bad news that undercuts one of their pillars of support. Demand for their cars isn’t what everyone thought. As reported by Tesla, they have a capacity to build between 170 to 190 thousand cars per quarter. And yet, Tesla only delivered 139,000 cars this quarter. What happened? Tesla gave recent guidance that they were on track to hit their annual 500,000 cars delivered in FY 20 when every other auto maker cut their guidance due to Covid. So according to Tesla, they didn’t anticipate Covid being an issue a few weeks ago.
In the past, Musk would always say that the only thing holding Tesla back was production capacity. That Tesla sales weren’t where they needed to be, not for lack of demand, but lack of capacity. For the first time, Musk can no longer make that claim. With Tesla’s China factory now up and running, Tesla deliveries were only about 80% of capacity.
This is big. This is a pivotal moment in Tesla’s history that everyone will one day look back on and say that the story fundamentally changed. And it’s being glossed over falsely by all of Tesla’s handmaidens in the press to keep the truth from spooking investors. Underscoring how bad this news is for Tesla is their effort to color the news coverage.
The FactSet consensus a week prior to Tesla’s delivery announcement was that Tesla would deliver 144,000 cars. Tesla missed by 5,000 units. Not wanting to see headlines along the lines of “Tesla misses Q3 delivery guidance”, Tesla actually called analysts a few days before their announcement requesting that they reduce their guidance. Analysts complied with the request. They have a vested interest in looking accurate in retrospect.
Voila! Now the tech websites are everywhere reporting about Tesla’s record deliveries that surpassed Q3 consensus estimates. Is it really exceeding expectations when everyone lowered the bar two days prior? No.
The real story is that demand for Tesla’s vehicles has peaked. The “unlimited demand” myth is dead. It’s no longer capacity constrained and there is now unsold inventory accumulating in lots. Their “record” quarter was purchased by price cuts which burn investor cash. The growth is over folks. Tesla is already getting crushed in Europe by competition and North America has stalled. If it wasn’t for China there would be no record. And China’s growth will end soon. Tesla Bull Adam Jonas of Morgan Stanley is even predicting that Tesla’s sales in China will dwindle to zero in a little over a decade.
This is big. This is a pivotal moment in Tesla’s history that everyone will one day look back on and say that the story fundamentally changed. And it’s being glossed over falsely by all of Tesla’s handmaidens in the press to keep the truth from spooking investors. Underscoring how bad this news is for Tesla is their effort to color the news coverage.
The FactSet consensus a week prior to Tesla’s delivery announcement was that Tesla would deliver 144,000 cars. Tesla missed by 5,000 units. Not wanting to see headlines along the lines of “Tesla misses Q3 delivery guidance”, Tesla actually called analysts a few days before their announcement requesting that they reduce their guidance. Analysts complied with the request. They have a vested interest in looking accurate in retrospect.
Voila! Now the tech websites are everywhere reporting about Tesla’s record deliveries that surpassed Q3 consensus estimates. Is it really exceeding expectations when everyone lowered the bar two days prior? No.
The real story is that demand for Tesla’s vehicles has peaked. The “unlimited demand” myth is dead. It’s no longer capacity constrained and there is now unsold inventory accumulating in lots. Their “record” quarter was purchased by price cuts which burn investor cash. The growth is over folks. Tesla is already getting crushed in Europe by competition and North America has stalled. If it wasn’t for China there would be no record. And China’s growth will end soon. Tesla Bull Adam Jonas of Morgan Stanley is even predicting that Tesla’s sales in China will dwindle to zero in a little over a decade.
Why is the dying growth story such a big deal? Because the stock price is built on future growth. To date Tesla has been one big cash incinerating machine. It’s the future growth story that props up the stock price. Now that this being proven false, what is going to happen? That’s why Tesla is desperately trying to change the narrative to autonomous driving, battery technology, or Lithium mining. Because their auto business is one big money losing venture that isn’t going to grow much more.
Newsflash! Tesla’s core auto business has been losing $100 million dollars per month year-to-date and now the “unlimited demand” myth has been proven false. But the delicious part is that it’s been proven false by Tesla. Tesla critics have been saying for months that the demand for Tesla’s vehicle has been on the wane. To which Musk quickly denounced any truth to the accusation. But now, finally, the critics have been proven right.
Newsflash! Tesla’s core auto business has been losing $100 million dollars per month year-to-date and now the “unlimited demand” myth has been proven false. But the delicious part is that it’s been proven false by Tesla. Tesla critics have been saying for months that the demand for Tesla’s vehicle has been on the wane. To which Musk quickly denounced any truth to the accusation. But now, finally, the critics have been proven right.
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