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Electric vehicle deliveries estimated by Tesla Inc. in the first quarter suggest that Chief Elon Musk’s bet on growth in China and Europe is starting to bear fruit.
The results marked a strong start to the year in which Musk, the company’s chief executive, is counting on global operations to help increase production and sales. Tesla based in Palo Alto, California delivered 184,800 cars worldwide in the first three months of the year, exceeding the average estimate of 169,850 in a Bloomberg survey of analysts and beating the fourth quarter figure by about 4,000 vehicles.
The quarter was “a massive home run in the eyes of bulls,” Dan Ives of Wedbush wrote in a research note on Friday. “We believe that China and Europe were particularly robust this quarter, as the track now puts Musk & Co. at over 850,000 in the year, which is well above expectations.”
Musk is entering China – which is already the largest automotive market in the world, including for EVs – to gain a foothold amid competition from local electric vehicle startups, as well as Volkswagen AG. Car sales are expected to increase in the country this year for the first time since 2017, and in March Prime Minister Li Keqiang told the National People’s Congress that the government will help increase the number of EV charging stations and battery exchange facilities.
Tesla’s volume stands out from most other automakers, which are declining in part due to restrictions on electronic chips, analysts at Jefferies said in a research note. “The shares should respond well to the delivery data for the first quarter.”
After a remarkable run in 2020, which saw its stock price rise more than 700%, Tesla’s shares fell about 6% this year through April 1. Friday was a holiday in the United States
“It was a brutal settlement for Tesla and EVs, but we believe it will now be in the rearview mirror,” wrote Ives, who maintained a “neutral” rating on the shares.
‘Strong Reception’
Tesla recently updated the Model S sedan and the X, an SUV. Without model S and X vehicles were manufactured in the quarter and only 2,000 were delivered in total.
“We are encouraged by the strong reception of Model Y in China and are rapidly progressing to full production capacity,” said Tesla in a statement. The new model S and model X they were also “exceptionally well received,” said the company, adding that it is in the early stages of ramp production.
Tesla currently manufactures the Model S and X only at its factory in Fremont, California, and the smaller models 3 and Y there and at its factory in Shanghai. It plans to build two more factories this year, one in Texas and other near Berlin. The company does not divide sales by geography, but the US and China are its largest markets and almost all sales were Model 3 and Y.
With production at the Fremont plant temporarily closing in February due to parts supply issues, Tesla’s Shanghai plant, with higher margins, will account for a larger share of volume in the quarter, which should sustain profitability, said Jefferies in the note.
Chief Financial Officer Zachary Kirkhorn warned in January that production would be low due to the transition to renewed products, while global semiconductor shortages and port delays were also expected to weigh in the quarter.
Tesla said its delivery count should be seen as a little conservative and the final numbers could vary by as much as 0.5% or more.
The quarterly delivery number is widely seen as a barometer of demand for Tesla vehicles and consumer interest in electric vehicles around the world, as old car makers launch their own electric cars.