Tesla's quarterly deliveries fall less than expected, shares rally

Tesla on Tuesday reported a smaller than expected 5% drop in vehicle deliveries in the second quarter  as the electric carmaker's price cuts and incentives helped mitigate cooling demand.

Shares of the world's most valuable carmaker rallied more than 10% on Tuesday, hitting the highest level in nearly six months.

The higher than expected deliveries data "greatly assuages concerns regarding softening EV demand", said CFRA Research analyst Garrett Nelson .

"The stock continues to ride a wave of positive momentum after its annual meeting in mid-June in which shareholders re-approved CEO Elon Musk’s 2018 compensation plan," he said.

While the stock rebound and delivery figures were viewed by some analysts and investors as a sign of possible improvement for Tesla ahead of its robotaxi reveal on August 8, others worried the EV maker is exhausting its "bag of tricks", according to research firm Edmunds, with its price cuts and higher incentives.

Tesla handed over 443,956 vehicles in the three months to June 30, 4.8% lower than a year earlier and up 14.8% from the preceding quarter.

Wall Street on average had expected the company to deliver 438,019 vehicles, according to 12 analysts polled by LSEG. Tesla delivered 422,405 Model 3 and Model Ys, and 21,551 units of other models, which include the Model S sedan, Cybertruck and Model X premium SUV. It produced 410,831 vehicles from April to June

Tesla has been slow to refresh its car lineup at a time when rivals, especially in China, have come up with new affordable models, and as high interest rates dampen demand. Despite headwinds for its mainstay car business, investors overwhelmingly voted in favour of Musk's record $56non (about R1,042,252,400,000) pay package at the meeting.

Board chair Robyn Denholm said prior to the vote that reinstating the pay package was necessary for "retaining Elon's attention and motivating him".

Musk said in a social media posting that Tuesday's rally of Tesla stock is "small relative to vehicle autonomy and Optimus", referring to his company's self-driving cars and humanoid robots he has said will significantly boost the EV maker's market value once they become reality.

China

Tesla does not provide regional breakdown of sales, but some analysts said better than expected sales in China and the US may have helped Tesla deliver stronger than expected results.

Tesla offered loans with interest rates of zero or near zero percent on car purchases in China and the US. In the US it heavily promoted its leasing plans, which make its vehicles eligible for $7,500 (about R139,587) federal credits. Chinese carmakers said their sales grew by double percentage points during the second quarter. BYD said its second-quarter sales of battery electric vehicles jumped 21% to 426,039.

Tesla's China sales, which include domestic sales and exports to Europe and other countries, fell 17% in the second quarter from a year earlier. The company gave no breakdown on its China sales.

Tesla sales were weak in Europe, with sales down 36% in May alone, due to waning EV subsidies and poor demand from fleet operators, who accounted for nearly half its sales in the region last year. Meanwhile, Rivian's vehicle deliveries rose about 9% from a year earlier in the second quarter ended June 30, beating analysts' average estimates. GM said its EV sales jumped 40% in the second quarter from a year earlier, while Hyundai and Kia also posted sales gains during the period.

Headwinds

This marks the first time Tesla posted a year-on-year sales fall for a second consecutive quarter.

Musk has said he expects the company to increase deliveries in 2024 from a year earlier. However, Wall Street largely expects a drop due to poor sentiment around EVs.

Tesla said in January it expected "notably lower" growth in deliveries this year and dropped its goal of delivering 20-million vehicles a year by 2030 in its latest annual impact report published in May, a drastic change in tone from its long-term annual growth target of 50%. Musk has responded to the headwinds with rounds of aggressive cost-cutting, including mass layoffs and a retreat from major strategic plans including those for a long-awaited affordable model that had been expected to cost $25,000 (about R465,291) and take on Chinese rivals.

Musk said the company would introduce "new models", including affordable ones, possibly by late this year. He said the models would be based on its current platforms and production lines, which marked a retreat from earlier plans. Musk has promised to instead focus Tesla on self-driving cars, but some investors and experts remain skeptical Tesla can perfect it soon.

Tesla shares were up 7.7% at $226.11 on Tuesday afternoon. The shares have declined about 9% so far this year.