Musk’s Leaked Email: Tesla Bears Reel on Q3 Hopes


Sep. 27 2019, Updated 11:45 a.m. ET

Tesla (TSLA) bears are facing another nightmare, this time from a leaked email by Elon Musk, obtained by Elektrek. Investors might recall that, in July, a leaked email from Tesla automotive president Jérôme Guillen suggested the company was planning to take a big leap in production. This production push came after the company set a delivery record during the second quarter.

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What Musk’s leaked email revealed

Yesterday, Electrek reported Musk’s leaked email revealed the CEO thinks Tesla has “a shot” at delivering 100,000 cars in the third quarter. In the second quarter, Tesla’s achieved record deliveries and production. Its deliveries grew 51% sequentially and 134% YoY (year-over-year) to 95,200 vehicles. Many critics doubted Tesla would reach this milestone in Q3, given that tax credits were reduced July 1. The tax credit was likely a major driver behind Tesla’s record second quarter.

Last year, the company’s cars were eligible for a $7,500 tax credit. That credit fell to $3,750 early this year, and to $1,875 on July 1. It is set to be eliminated in 2020. Without the credit, consumers may have less incentive to buy Tesla’s cars.

New markets for Tesla’s Model 3

One thing could offset the incentive loss. Tesla’s Model 3 was rolled out overseas this year. These new markets have been a strong drivers for the company’s deliveries. The vehicle has high demand in the UK, South Korea, New Zealand, and Australia.

The Model 3 became the UK’s third-bestselling car in August, and Tesla is expected to see strong sales in Europe. Furthermore, Piper Jaffray estimates the company’s China deliveries are gaining momentum, and have risen 175% YoY in the third quarter.

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“Shot at achieving” 10,000 vehicle deliveries in Q3

In the leaked email, Electrek reports Musk wrote, “We have a shot at achieving our first 100,000 vehicle delivery quarter, which is an incredibly exciting milestone for our company!” He added that net orders are “tracking to reach about 110,000” in Q3. Elektrek notes that “it’s very likely that goal is very achievable,” as Musk sent the email “just 5 days before the end of the quarter.”

Tesla typically pushes to boost deliveries near the end of the quarter. This quarter, Tesla announced free Supercharging and it discounted inventory vehicles to push deliveries.

Tesla’s challenge to drive up deliveries

Electrek reports Musk also wrote, “The challenge is making sure that we have the right car variants in the right locations and rallying as much as our company resources as possible to help with the end of the quarter deliveries.” Tesla is trying to improve its delivery logistics to minimize delivery delays and improve its financials.

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Leaked email creates a nightmare for bears

The recently leaked email caught bears by surprise. Tesla stock rose more than 6% yesterday following dews of the company’s delivery push. Year-to-date, TSLA has lost 27%. It has underperformed the S&P 500 (SPY) and the Dow Jones Industrial Average DIA), which have gained 18.8% and 15.3%, respectively. Tesla’s Chinese rival, NIO (NIO), has been in a free fall since its weaker-than-expected Q2 2019 release. NIO stock has fallen about 28% since the release on September 24.

Concerns about Tesla’s profitability

Profitability is still the main concern for Tesla. The company achieved record deliveries in the second quarter, but they were offset by a greater-than-expected loss. Therefore, while Tesla could set a new delivery record in Q3, there are still concerns about whether the company can be profitable. Credit Suisse (CS), for example, thinks Tesla’s third-quarter deliveries might offer a positive surprise, but believes its margins could be a larger concern.


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