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Will Tesla Have To Pre-Announce A 42% Q1 Sales Miss?

Mar. 04, 2018 3:07 PM ETTesla, Inc. (TSLA) Stock509 Comments
Anton Wahlman profile picture
Anton Wahlman


  • We now have sales numbers for January and February for Tesla’s biggest countries, including the US and Europe.
  • For some, we have only January as of yet, but they are remarkably consistent with the ones from whom we also have February numbers.
  • Adding it all up, it’s looking like a 42% shortfall for Tesla.
  • Adding up all geographies, it looks like Tesla sold an estimated 11,548 cars in January and February combined.  Can Tesla deliver a similar number - 11,548 - in March alone?
  • If so, the quarter would end at 23,096 units - a 42% shortfall from a 40,000 unit consensus (25,000 Model S and X combined, plus 15,000 Model 3).

We all know that Tesla's (NASDAQ:TSLA) Model 3 sales have already fallen way behind Tesla's guidance this quarter. Its guidance has been for 400,000 Model 3 units in 2018, for a total of 500,000 units when adding 100,000 from the Model S and X columns.

With 1,875 Model 3 units in January and 2,485 in February, the Model 3 already is looking like an epic miss of Olympian proportions. At 2,500 per month, that would be a measly 30,000 a year, or more than a 90% shortfall from the 400,000 per year guidance. Adding insult to injury, Tesla admitted in its February 7 financial report that the Model 3 has negative gross margin even at a selling price that's currently starting at $50,000. One certainly understands the company's reluctance to start selling the $36,000 version.

But enough about the Model 3 for a change. Seeing as the Model 3 is suffering from an amazing inability to enter proper volume production, Tesla is left with selling its existing models - Model S and X. So, how are they doing?

Let's start with the six countries in Europe that as of the time of this writing (Saturday) have reported February month numbers to their respective government registration authorities:

Model S+X

Jan-Feb 2017

Oct-Nov 2017

Jan-Feb 2018













































As you can see in the table above, it's a massacre. No matter whether you compare the two first months of this quarter with the first two months of the previous quarter, or the one a year ago, sales are down by

This article was written by

Anton Wahlman profile picture
I am a former sell-side analyst -- UBS 1996-2002, Needham 2002-2006 and ThinkEquity 2006-2008. These days I review automobiles and other technology products, as well as analyze the automotive and technology industries, and coming up with long/short ideas. I also continue to write (less frequently) on macroeconomics and politics.

Analyst’s Disclosure: I am/we are short TSLA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

At the time of submitting this article for publication, the author was short TSLA and long GM. However, positions can change at any time. The author regularly attends press conferences, new vehicle launches and equivalent, hosted by most major automakers.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (509)

04 Apr. 2018
Wonder when Tesla gets investigated by SEC? FTC, other angencys for false marketing claims etc....everything he says seems to be smoke, to keep the stock pumped....Tesla is unsustainable, it's a goof. VW produces and sells in 1 day, what Tesla tries to do in a year, Tesla is not a car maker, it's a goof. Now Tesla with recalls, etc, no network for parts, repairs, it's unsustainable

>>the #1 complaint heard so far from Model 3 owners is the ride quality,

That's a funny item, and a matter of taste. I've seen comments about the ride, but most of them say its generally pretty good, especially in light of the car's handling.

I hate a great number of so-called "good riding" cars because they are numb drivers and can have poor ride motions when the road undulates or otherwise deviates from smooth concrete. I much to prefer feeling the road to having it make me sick.
"That's a funny item, and a matter of taste. I've seen comments about the ride, but most of them say its generally pretty good, especially in light of the car's handling"

I don't have a lot of experience with cars of extremely varying ride quality but it's notable how many owners are either complaining or remarking on it.
So far I'm quite disappointed with the Model 3 rollout; it still feels like Tesla is in their 1st year of automaking which is not a good feeling when this is the car intended for a more mainstream customer.
18 Mar. 2018
I have read that the model 3 has such poor build quality, not even seen in the cheapest Kia or Chevy, Tesla is pretty much gone in less than 4 years..no one remembers Enron, MCI, Bernie Madoff, all looks good, on the outside...until it doesn't! Toys R Us goes out of business and it does $11 Billion in sales!!! With a network of stores, Tesla has a network of nothing

The only Model 3 I've seen looked pretty good, but it might have been an anomoly or a later production, run, but...

This is interesting from Sandy Munro, the guy who compared it to a Kia:


the #1 complaint heard so far from Model 3 owners is the ride quality, to the point where several have had the springs replaced or adjusted.
This is something that Tesla should have gotten right already.
Missteps like this are not going to play well with Average Joe.
18 Mar. 2018
VW announces 16 factories will be doing EV, VW is a real car maker, Tesla is a goof...Tesla cannot possibly compete with VW on VW grand scale around the world. Tesla is the Hudson, DeSoto, Tucker of the 21st century. VW can get supplies on a global grand scale, Tesla runs an obsolete GM factory, one factory is not a car mfg. It's a hobby. Porsche div ev, will smoke Tesla,
I need you and the other naysayers to make more buying opportunities for me.
Can you do that?
TESLA in its first two months has already doubled GM Bolt sales. The rate of production growth is more than 300% of all previous Model-3 sales in the last two months.
Look again at the defects in then Bloomberg Vin Tracker.
It does not show the production pause between February 20 and 24 at all.

It has the the production level at 700 + during that time period.
It has not been validated properly. Bloomberg is incompetent.
That's why they adjusted and dropped production to under 600 for a while. Keep believing, we need your type to hold on until the bitter end....
The China trade issues are horrendous. The US needs a quid pro quo trade policy with its major trading partners. China has been stacking the deck against US Domestic Auto industry with its
import restrictions, tariffs, and factory ownership policies and practices.

If it could China would gut all the major US industries. Musk apparently called attention to this during the Obama administration. Obama did nothing. Something needs to be done now or the US will be faced with a flood of Chinese auto imports against which the domestic auto companies cannot compete.

>>The US should mirror China tariff and local ownership policies in response to its policies and or it will suck the life out of all US major industries.

I'm not sure what the best policy is, but it sure isn't what we've been doing. The US is somehow the devil when we do what other countries do. That's a recipe for disaster.
Maybe some good news coming for TESLA and other EV manufacturers. GM is now pushing for an extension of the the EV subsidy!

Meanwhile, Elon has put the a "quid pro quo" tariff on Trump's desk. It got Trump's attention.
US manufacturer's are having to pay 25% tariff to export autos to China while China pays only 2.5% tariff to export to the US. The current disparity in tariff will enable China to ravage the US Automobile market.

To avoid the China tariff a US manufacturer has to agree to set up a factory in China in which it owns less than a controlling interest. With this policy in place China is perfectly setup to destroy the US automobile industry.

The US should mirror China tariff and local ownership policies in response to its policies and or it will suck the life out of all US major industries.
18 Mar. 2018
VW has been in China since like the 70's and is the biggest car maker in China, it can succeed in China, U.S. makers can't because U.S. products suck...Audi BMW, Daimler all do extremely well in china, VW has 7 factorys in China, GM is a goof, it has the nerve to mfg a Buick in China and send it back here, VW and other rel car makers produce in China for China, big difference, which is why VW is a real car maker. VW also operates the world's biggest car factory under one roof in Wolfsburg Germany, and the biggest car factory in North America Puebla Mexico, GM Ford and failed Chrysler can't, why is that, cus they are poorly run, they don't compete, they just whine and complain. GM bailed out of Europe, soon S. Korea, while VW is #1 in Europe and China, GM is not really run well, nor do they make stuff teh world wants, that's the difference

>> $55 billion is not a flyspeck

Well...let's see.

It's about 3 thousandths of a percent of the country's annual economic output.
It's about 6 ten thousandths of a percent of the total net worth of American households.

Sounds like a flyspeck to me.
"Sounds like a flyspeck to me"

Don't underestimate the value of a good scapegoat

>TSLA would be a good bet.

You're hyperventilating now. Over-valued or not, Tesla is just a flyspeck in the economy.
cparmerlee profile picture
Dino wrote "Tesla is just a flyspeck in the economy."

Market crashes don't just happen. They almost always have triggering events. $55 billion is not a flyspeck.

I am not necessarily predicting this scenario, but it is very plausible that TRSLA could hit the point that it abruptly drops to $200, vaporizing $30B in market cap. This could spread to NFLX, Linked-in, Twitter and others. Now we're talking about force multipliers taking us to a quarter trillion in vaporized value -- and that could happen in the span of a week. At that point, it is on.

I think the more likely scenario is that TSLA meanders in the $250-$350 range until the recession happens on its own, and the recession triggers a collapse of TSLA stock. Beware the vicious circle. Actually, this is my main interest in TSLA now. I think we are well beyond the point where the company can survive. It is now about when the collapse occurs. I am hoping for a rapid collapse, but one with enough warning signs for me to get in before the majority of the collapse.
B4B00SHK4 profile picture

I miss your old commentary on the Tesla hype cycle. I've taken up the habit of going long Tesla at 300 and shorting at 360-ish. If you were to take a stab at it, how much longer do you think this pattern lasts?

For what it's worth, I think 2018H2 is when Tesla suffers a major correction. Yet, it seems that Q1 deliveries and earnings will be egregiously bad. So I'm of two minds. Timing, of course, is the hard part.
cparmerlee profile picture
B4, I think we are nearing the end. of that trading range. I believe that is unsustainable with the m3 news being so bad.

The big caveat is that when the ramp is this bad, that allows the company to claim that profits are just around the corner. This is why I have been staying out.
cparmerlee profile picture
Inst wrote "it looks like TSLA could lead the recession instead of being taken down by it. "

I don't know there was ever a case where a single company triggered a recession or even a bear market. But I don't think we have ever had a set of companies more over-valued than we see today, and some of them have staggering market cap numbers. If one company could do it, TSLA would be a good bet.
07 Mar. 2018
With the head and shoulders forming, the rate hike coming, and the tariffs on track, it looks like TSLA could lead the recession instead of being taken down by it. Short-term target: 290?
mamer1 profile picture
Its simple, 8 billion usd profit with a p/e of 25

>>I'm a Tesla bear. But does anyone really think they can be this far behind schedule?

I absolutely believe that they can be that far behind schedule, but I suspect they had to shut the line down to do it.
JayTee14 profile picture
I'm a Tesla bear. But does anyone really think they can be this far behind schedule?
kitsinu profile picture
I think they are making major changes to the production lines. I say lines because it seems that this impacts Model S and Model X production in addition to Model 3 production.

I suspect that some major piece of machinery finally wore out and needed replaced. Alternatively, there is a softness to demand and a major piece of machinery is being replaced to hide the low demand with lower numbers.

The good news is that there should be actual major improvements to the Model 3 line beyond where I thought it would cap out at 2,000 per week. Further, since this is at the auto plant instead of the Gigafactory, there should be plenty of batteries built up in time for the end of the quarter push for 2,500. I think that we will see what the line can actually do without the battery bottleneck.
"I think they are making major changes to the production lines"
I'm going to side with the bears and say that this is something they should have worked out to some extent before the handover event.
This is their 3rd car, the long-promised and awaited "even more affordable" and after the teething pains of the Model S and the awful 1st year productioin woes of the Model X, they should have known & done much better.
Do I think the Model 3 is going to be the prophesied quality disaster touted so widely on SeekingAlpha?
But it could - and should - have been launched & ramped much better.
kitsinu profile picture
I seem to recall that Tesla dropped the Model S and Model X from three shifts down to two shifts. It isn't very surprising that their sales would be down about 33% as a result. That is it more than 33% by a significant margin is a surprise.

I have to wonder if Tesla knew their sales were dropping significantly and cut production in anticipation. The alternative is that Tesla has a lithium or cobalt shortage. For those that say Panasonic is taking care of that, I recall Elon Musk personally traveling to different mines to secure supplies. That isn't to say that he was successful, he might simply have been trying to do a hard sell.

I will be amazed if this turns out to be true and doesn't crash the stock between April 2 and earnings. Model 3 production problems is one thing, soft sales in the core business is another.

*** channeling my inner Tesla bull ***
Wow! What incredible growth in Italy! At this growth rate, in twenty years Tesla will be selling over 70,000 cars in Italy per month! Go Tesla! Elon Musk, I want to have your baby!
*** DND, am putting my inner Tesla bull through a hamburger machine for lunch ***
Tesla has and continues to do many things, but falls short on several key things: production targets, transparency and profit.

Time is running short.
kitsinu profile picture
Seems that Tesla went from three shifts in 2016 to two shifts in 2017, so this is way old news that did not greatly alter production. My mistake.
I disclose that I have no dog in this fight. I have read and will continue to read what is written about Tesla and Space X because I think Elon Musk is a visionary and may one day succeed in producing Tesla Model whatever in large numbers as well as sending a rocket to Mars and maybe even people in my lifetime (I am a child of the 60's). I am not sure how he will be able to manage the stroke size debt that grows with each car sale but it may help to keep in mind that Tesla is also an energy company. If the climate change experts are right and the world is indeed getting hotter then solar has a great future. From panels to roof tiles to windows to sidewalks to roads to whatever, there are plenty of surfaces that can potentially generate a current. If the experts are wrong, and the world enters a cooling period, well as an energy company, perhaps Elon will tackle wind or wave power in the future as there will be less sun and more wind with bigger waves. Love him or hate him Elon does make more than his share of press, which several have duly noted. Good luck to all who are betting for or against Elon. I will look elsewhere for Alpha.
They should, but won't... just like always
Gordonr profile picture
What do you think of all the Bolt problems.
It is a horrible car. Look on YT.
middleclass_canuck profile picture
"What do you think of all the Bolt problems.
It is a horrible car. Look on YT."

Has favourable reviews.

Bolt being bad doesn't save Tesla.

What is your point?
Gordonr profile picture

Because the Bolt is a bad car. Look it up.
No comparison to the M3

>>Because the Bolt is a bad car.

Hardly. It's a fine car.
It's no Model 3, but that leaves plenty of room to be a good car, especially if you're looking for a suburban mom runabout.
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