Tesla's Q2 Deliveries May Shock Wall St.
As Tesla (TSLA) -Get Report wraps up its second quarter of a turbulent 2020, investors and analysts await the company's quarterly delivery and production report expected to be released later this week. As of June 30th, the FactSet consensus estimate for Tesla's Q2 deliveries is 72,149 vehicles. Tesla's company compiled consensus estimate from June 24th sits slightly lower at 70,328 deliveries.
While expectations have risen recently, in part due to a leaked email from Elon Musk, Tesla may be positioned to exceed consensus estimates.
Production estimates should be split by factory to assess production rates from Giga Shanghai and Tesla's Fremont factory separately.
May production at Giga Shanghai has been reported as 11,501 vehicles. Production was also reported to have been halted at Giga Shanghai from May 1 through May 9. If that accurate, then Tesla's weekly production rate would have been 3,659 vehicles/wk excluding known downtime. Tesla has publicly targeted 4,000 vehicles/wk at Giga Shanghai by mid-2020. Assuming a slight production increase in June to 3,850/wk suggests Model 3 production at Giga Shanghai of 39,212 vehicles for Q2.
When considering Fremont, it is helpful to consider production rates by vehicle model. Tesla's Model Y production in Q1 exceeded 2,800 vehicles and has continued to ramp in Q2. The highest vehicle identification number (VIN) that has been reported for Model Y is slightly above 24,000. That provides a ceiling on the production number. Not all VINs are produced sequentially, but estimates of between 50% - 75% of the highest VIN have proven successful in the past. A 65% rate would put Model Y production near 16,000 vehicles this year. Assuming 3,000 in Q1 leaves 13,000 for Q2.
For Model S and Model X, Tesla has been producing at a rate of 1,200 - 1,300 per week for the last four quarters. Accounting for some time to ramp production back up after restarting Fremont production in early May, Tesla could have produced around 8,450 S/X in the ~7.5 production weeks.
Model 3 in Fremont may represent the most significant uncertainty for the quarter. Assuming reported production numbers from China are accurate, and Model Y production of 3,000 in Q1, Tesla's weekly production rate on Fremont-made Model 3s fell from around 6,500/wk in Q4-19 to around 5,800/wk in Q1-20. While the reason for the decline is unclear, it breaks the prior pattern of production rate increases.
Assuming 5,800/wk represents a new steady-state rate for Fremont Model 3s, a slow ramp back to that production rate could materialize as roughly 5,300/wk in June. This rate would allow for some remaining impact from COVID-19 in June. A lower production rate of ~3,500/wk in May excluding downtime would lead to about 33,700 Model 3s produced in Fremont in Q2.
Tesla has stated a combined installed annual production capacity of 400,000 Model 3/Y vehicles in Fremont, or 7,700 per week. The above estimates for Model 3 and Model Y combine peak at 7,500 per week, below installed capacity.
Summing these estimates yields total production for Q2 of 94,358 vehicles despite assumed production rates below Tesla's installed capacity.
With a path to production above 90,000 vehicles, and nearly 30,000 vehicles in inventory to begin the quarter, Tesla may be in position to deliver more than 95,000 vehicles in Q2-20.
Tesla's inventory rose by about 14,000 vehicles in Q1. Typically, quarters following such inventory increases result in deliveries exceeding production by about 5,000 units. However, Elon Musk's recent tweets about logistical challenges allude to the fact that Tesla may not be able to deliver to all customers before quarter end. If that is the case, deliveries may exceed production by a lesser amount, or may even trail production.
Such variability makes a delivery estimate difficult. If a small inventory drawdown is assumed, deliveries of around 96,000 would be attainable on production near 94,000. It is within Tesla's capacity to greatly exceed the consensus estimates near 70,000 deliveries.
For more analysis, please see the included video.
As far as when the delivery and production report will be released, Tesla releases such reports within three days of quarter end. It is worth bearing in mind that the Nasdaq stock exchange is closed on Friday, July 3rd. If Tesla's numbers are ahead of expectations, they may target a Thursday morning release to prevent the numbers getting lost in the shuffle of the holiday weekend.
Historically, Tesla has released the delivery and production report on the second day following quarter end 52% of the time. However, for Q2 results, that number jumps to 60%. More recently, six of the last eight releases have occurred on the second day following quarter end. It appears likely that Tesla will release the report on Thursday, July 2nd, outside of trading hours.
Disclosure: Rob Maurer is long TSLA stock and derivatives. Elon Musk image credit to insidermonkey.com.