Tesla delivered 101,320 Model S and Model X worldwide in 2017. But that record could easily slip out of their hands in 2018 because Tesla delivered just 21,800 Model S and Model X during the first quarter. Add the 24,761 units Tesla delivered in Q2, the company will have to deliver 53,439 units during the second half of the year to reach their guidance of 100,000 units for the year.
But the real concern here is not Tesla’s production capacity or the demand for Model S and Model X. The company noted that “Demand for Model S and Model X vehicles remains high, with Q2 2018 being our highest ever Q2 for Model S and Model X orders.” in its second quarter shareholder letter.
Since demand remains strong, Tesla can easily play catch up in the subsequent two quarters and increase production. The real concern here is not about Tesla’s capacity but whether Tesla has enough bandwidth to take care of Model S and Model X production while also taking care of the Model 3 ramp up.
Things didn’t go really well for Model S and X during the third quarter of 2017 when Tesla started Model 3 production. But Tesla pulled things back on track this year, building more than 24K Model S and X units in the first and second quarters of the current fiscal.
Tesla has built 49,489 Model S and Model X in the first six months of the year. Building an additional 511 units in the second half is not going to be a big problem for the company. So from a production point of view, Model S and Model X look settled to reach their guidance of 100,000 units for fiscal 2018.
Now with the production question answered, let’s take a look at the other side of the equation: demand.
United States
The United States is the largest market for Tesla, accounting for nearly 50k Model S and X units in 2017.
Will Tesla be able to hold its demand in the United States?
Tesla should face no demand problems for Model S and Model X in the United States as Federal Tax Credit is expected to stay at $7,500 till December 31, 2018.
Tesla has delivered 12,020 Model S and 10,850 Model X in the United States till July this year, which is nearly the same number of units the company delivered last year.
Model S Sales: 12,020 (2018) VS 12,620 (2017)
Model X Sales:10,850 (2018) VS 10,595 (2018)
Tesla has so far tracked its 2017 sales performance in its largest market, give or take.
China
According to Bloomberg data, Tesla recorded $508.7 million in revenue during the first quarter of 2018 compared to $503.0 million in the first quarter of 2017. We don’t have details about Tesla’s performance during the second quarter, but the on-going trade war and the subsequent price increase will likely impact Tesla sales in the country.
According to our estimates, Tesla sold nearly 16,500 Model S and Model X in China last year. The odds are quite high for sales to drop sharply during the second half of 2018, which means Tesla needs to find space in other markets for at least few thousand units to compensate for any weakness in China.
Europe
The electric car maker has sold 13,597 units in the first six months of the current fiscal compared to 12,230 units the company sold in the region last year. Sales have increased despite the company’s on-going service issues in Norway. If Tesla quickly increases service capacity in Norway, the company will be in a position to do a lot better in the second half of the year.
But now, the Netherlands seems to be picking up the pace. June registrations came in at 1125 units against Norway’s 1112 for S and X, and as of July, the Dutch are officially residents of Tesla’s third largest global market after the U.S. and China.
“In Norway, Tesla delivered just 64 units of Model S and Model X in July, a far cry from the 160 units the company sold in July last year.
As Tesla took the foot off the pedal in Norway, the Dutch seem to be getting all the attention. In the first seven months of the current fiscal, January to July, Tesla has sold 1,927 Model S and Model X in Netherlands, slightly better than the 1,877 units the company sold in Norway.” – Shankar Narayanan on 1redDrop.
My Predictions:
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Tesla will hit its guidance for 100,000 units for fiscal 2018 as long as the company keeps its production rate steady.
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Tesla holds its ground in the United States, selling nearly the same number of units this year compared to last year.
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China sales decline in 2018 compared to 2017
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Tesla makes up for the difference by increasing sales in Europe, with the Netherlands already lending a helping hand
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Fourth quarter performance in Norway will be very important to achieve its goals
