Tesla is poised for a delivery record despite demand concerns

Tesla Inc. is expected to announce record quarterly deliveries in early January, but that may not be enough to satisfy investors as the electric-vehicle leader grapples with inflation, rising interest rates, crimped production in China and concerns about softening demand.

In an effort to clear inventory, Tesla offered a rare $7,500 discount to U.S. customers who took delivery of a new Model 3 or Model Y at the end of the year, along with 10,000 miles of free Supercharging.

Deliveries are one of the most closely watched metrics by investors eager to see if Tesla can maintain its rapid growth.

The global total of fourth-quarter deliveries could reach 420,760 vehicles, according to 16 analysts surveyed by Bloomberg. That estimate, which doesn’t include some of the more recent analyst projections, exceeds the record 343,830 vehicles delivered in the third quarter.

The Inflation Reduction Act will provide up to $7,500 in federal tax credits for certain EVs starting Jan. 1. Tesla is the world’s dominant seller of electric vehicles and is well positioned to take advantage of some of the new law’s tax credits for battery cell manufacturing and locally assembled EVs.

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But to meet its goal to increase deliveries by 50% annually over several years — an objective Tesla warned it will fall just short of in 2022 — Tesla probably will make compromises when it comes to gross profit margins. Tesla has cut prices across its lineup in China and scheduled downtime at its plant in Shanghai.

Investors are signaling skepticism. Tesla stock plunged 65% this year through Thursday’s close, more than triple the 20% decline in the S&P 500 index. The shares edged higher Friday.

Tesla’s commanding market share is being threatened by intensifying competition from established major automakers.

And Chief Executive Elon Musk has been preoccupied by Twitter since he bought the social media platform, raising concerns that he was reducing his focus on Tesla. He also sold off a chunk of his shares to help finance the deal.

In April, Musk said Tesla would produce more than 1.5 million vehicles in 2022. The company made 929,910 cars through the first three quarters, so it would need to crank out more than 570,000 vehicles to meet that goal.

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In the third quarter, production exceeded deliveries by more than 22,000 vehicles, a gap that could continue this quarter with cars still in transit as the year comes to an end.

Ben Kallo, an analyst at Robert W. Baird, reduced his estimates for fourth-quarter and 2023 deliveries in a note this week “to account for the reported slowdown in production and a weakening macro environment.” Kallo, who has an outperform rating on Tesla shares, expects the automaker to report deliveries of 378,262 for the quarter.

“I’m worried about the general economic environment,” Kallo said on Bloomberg Television on Thursday. “Do people have the wallets to pay for $60,000 cars? That’s what the market is worried about too.”

Tesla’s Model 3 sedans and Model Y sport utility vehicles account for the vast majority of sales. The company will sell cars until midnight on New Year’s Eve and will report the global delivery and production totals within three days of the quarter’s end.

The Austin, Texas-based company has a long history of going all out at the end of the quarter, with Tesla employees from across the company pitching in to help hand over cars to customers. On the last earnings call, Chief Financial Officer Zachary Kirkhorn said that one-third of the quarter’s deliveries happened in the final two weeks of the third quarter.