Tesla Had a Record Quarter, so Why Did its Shares Just Nosedive?

The missed expectation is especially noteworthy because the fourth quarter of 2018 was the last period during which customers could earn a major federal tax credit for buying an electric vehicle, which would have boosted sales.

The price cut, which will apply to Model S, Model X and Model 3 cars, is in response to a reduction in green tax credits.

Chief executive Elon Musk is under intense pressure to deliver on his promise of stabilising production for the Model 3, which is seen crucial for easing a cash crunch and achieving long-term profitability.

The catalyst for the plunge was the release of fourth-quarter production and delivery results, which demonstrated improvements from July's "manufacturing hell" but were nevertheless short of Wall Street analyst targets. The federal government only offers the tax credit to companies that have sold fewer than 200,000 plug-in vehicles. That was cut in half, to $3,750, starting January 1.

We started the year with a delivery run rate of about 120,000 vehicles per year and ended it at more than 350,000 vehicles per year - an increase of nearly 3X.

The company says it produced almost 87,000 vehicles in the fourth quarter, also eight per cent above its previous quarterly record set in the third quarter. Tesla said it delivered 90,700 vehicles from October through December, while analysts polled by data provider FactSet expected 92,000. But customers in those markets still have several weeks to wait, with the company now saying those deliveries will start in February. Tesla said fourth-quarter deliveries were eight per cent higher than its previous high in the third quarter of 2018.

There remain significant opportunities to continue to grow Model 3 sales by expanding to worldwide markets, introducing lower-priced variants and offering leasing.

Ives added that Tesla shares are "hypersensitive to any issue around Model 3" and that it will remain a stock that is "guilty until proven innocent" until it discloses quarterly earnings figures next year.

By the end of the quarter, Tesla had 1,010 Model 3 and 1,897 Model S and X that was in transit to customers, which are expected to be delivered in early 2019. This is despite the electric auto maker only producing mid and high-priced variants for the Model 3, and deliveries only being exclusive to North America.

  • Anthony Vega