Tesla shares plummeted by as much as nine percent Wednesday after the company once again failed to meet delivery estimates for the fourth quarter.
CNBC reports that Elon Musk’s Tesla has yet again run into another stumbling block, once again failing to meet its expected fourth quarter delivery estimates. Tesla claimed to have delivered 90,700 vehicles in their fourth quarter, short of Wall Street projections for the company. Tesla also claimed to have boosted their production levels in the fourth quarter significantly, from 80,142 in the third quarter to 86,500 in the fourth.
CFRA analyst Garrett Nelson commented on the company’s sudden stock drop stating: “Tesla shares tend to a have a lot more noise and volatility than most, but we think investors who are willing to take a longer-term view of the story will be rewarded handsomely and continue to believe Tesla is on track to post one of the market’s most robust year-over-year earnings increases in 2019.”
Tesla also plans to cut the prices of all their vehicles by $2,000 in an attempt to offset a reduction in federal tax credits for drivers who buy electric vehicles, previously buyers received $7,500 in federal tax credits but this figure was recently cut in half. Wedbush Securities analyst Dan Ives told CNBC that Tesla’s failure to meet Wall Street projection was something that his firm had been prepared for: “It was a move that was within the realm of possibility, but it caught investors off guard,” he said.
In the fourth quarter, Tesla delivered 63,150 Model 3s, 13,500 Model S sedans and 14,050 Model X SUVs. In comparison, Wall Street projected 64,900 for the Model 3, 14,200 for the Model S and 13,600 for the Model X, based on average figures from previous quarters compiled by FactSet. CEO Elon Musk discussed the company’s latest issue stating: “What people should absolutely have zero concern about, and I mean 0, is that Tesla will achieve a 10,000 unit production week by the end of next year. […] I think people should really not have any concerns that we won’t reach that outcome from a production rate.”
Musk previously stated that Model 3 reservations had surged to over half a million, but on a recent conference call he went back on this statement saying: “To be more accurate, there have been 518,000 gross reservations for Model 3 and then we have 455,000 net reservations. But those cancellations occurred over the course of more than a year. The net gain since Friday, net of cancellations, has been over 1,800 per day – but I just didn’t want to leave people with the wrong impression.”
But he further claimed that those numbers are not a good representation of how much demand there is for the Model 3 as the company is not actually attempting to sell the vehicle yet: “I think this is inconsequential because with a small amount of effort, we could easily drive the Model 3 reservation number to something much higher, but there’s no point. It’s like if you have a restaurant and you’re serving hamburgers and there’s like a 1 hour wait for a hamburger, do you really want to encourage more people to come order hamburgers? That doesn’t make sense.”
One Twitter users noted that the Model 3 backlog is not, in fact, a backlog of orders for the car but for servicing of the vehicle:
21/ The new $TSLA Model 3 backlog is not an order backlog. You can buy one off the lot today. It's a service backlog. Tesla damaged its brand by rushing this car out. The extent of the damage will be known once we see EU sales numbers.
— Polixenes (@Polixenes13) January 2, 2019
With Tesla already under investigation by the Department of Justice and the Securities Exchange Commission, the future is not looking bright for the company. Frank Schwope, an analyst with NORD/LB commented on Tesla’s performance today stating: “Tesla disappointed the market. The deliveries are below our estimates and the consensus estimates. I don’t expect that Tesla operates in the black in 2019.”
The Tesla stock price currently sits at $310.83 per share as of the time of the writing of this article, a drop of more than six percent for the day.