Tesla’s Deliveries In Decline As Production Problems Bite

Tesla’s persistent production problems are causing deliveries from the electric car maker to flatline raising concern that the car manufacturer may have set targets that are unachievable. In the last one year there have been declining shipments according to the quarterly reports.

The declining shipments also raise questions over whether Tesla has reached peak demand and whether the electric car maker will manage to pull off meeting demand for its mass market car, the Model 3. This is especially so for investors who are betting on the electric car maker managing to ramp up production.

Big ambitions

Tesla’s chief executive officer, Elon Musk, is famous for his ambitious goal-setting but has a couple of times failed to meet the timelines he has set. For the mass market Model 3, Musk is aiming to have the company producing 20,000 units every month by December this year. That figure is roughly the number of cars that Tesla had been shipping every quarter for the last one year.

On Monday Tesla reported that it had delivered a little over 22,000 cars in Q2 and this was lower than the number of deliveries in the first quarter of the year. 25,051 vehicles were delivered in Q1 of 2017. Following the July 4th holiday, shares of the electric car maker fell by 7.5% when the U.S. markets reopened on Wednesday. This was the largest decline in one day for Tesla’s shares since last year in June.

Plateauing demand

KeyBanc Capital Markets and Goldman Sachs analysts have also reported that the demand for the premium-priced Model X and Model S was plateauing. As Tesla invests heavily in the production of the Model 3, it needs demand for its higher-priced cars to remain strong to support its newest model.

On July 28, 30 customers who have already paid for the Model will get the keys to the mass market car. Analysts are, however, questioning what seems to be lack of information on the car when it is just weeks away from being unveiled.

“We also are surprised that this ‘mass market’ vehicle does not have official photos, options, pricing or really any details available.” Cowen and Company’s Jeff Osborne, wrote in a research note to clients on Wednesday.

And after trading closed on Monday, Tesla failed to say the number of vehicles that were in transit, though this has been the norm with previous reports. According to Tesla the deliveries are being affected by manufacturing issues that have been encountered with the 100kWh batteries.