The Dark Side of Teslas Q2 2023 Delivery Report Keeps the Stocks Bears Still in the Game

By now, it is common knowledge that Tesla managed to pull off a stellar second quarter of 2023 amid elevated demand-related challenges. However, the dark side of the company’s latest quarterly delivery report seems to have provided just enough impetus for the stock’s bears to maintain their conviction.

As we noted in a previous post, Tesla produced 479,700 units during the second quarter of 2023. Moreover, in what constitutes another record, the company managed to deliver 466,140 units during the pertinent period, comfortably beating consensus expectations of 445,000 units (Factset).

On a more granular level, Tesla delivered 19,225 units of Model S/X EVs during the second quarter of 2023, beating expectations of 14,606 units. Critically, the EV giant delivered 446,915 units of Model 3/Y EVs during the pertinent quarter, significantly exceeding consensus estimates of 437,386 units.

TESLA CHINA Q2 SALES HIT NEW HIGH AS GIGA SHANGHAI-MADE CARS ACCOUNT FOR 53% OF GLOBAL DELIVERIES $TSLA

— FXHedge (@Fxhedgers) July 5, 2023

On a related note, Tesla shipped 93,680 EVs from its Shanghai gigafactory in June 2023, as per the estimation by the CPCA. For reference, Tesla had shipped 77,695 units from this factory last month and 78,906 units in the comparable month of last year.

The Dark Side of Tesla’s Q2 2023 Delivery Report

$TSLA inventory increases for the 5th quarter in a row.
Of these 109k produced-but-not-sold, I estimate that about 90k are in active inventory. With additional production coming online, it would seem that more price cuts should be expected pic.twitter.com/hnrnQ5K6N9

— CoverDrive (@CoverDrive12) July 2, 2023

This brings us to the crux of the matter. During Q2 2023, Tesla’s inventory increased for the fifth consecutive quarter, with around 90,000 units in the company’s active inventory. The EV giant’s days of finished goods inventory now stands at around 15.5.

$TSLA has excess capacity issues but is propping up Shanghai at the behest of its US & German plants.

Exports to Canada now from Shanghai vs SF (6x longer distance).

New German plant slowed down to take imports from Shanghai.

Full report here https://t.co/QGl8ANss4O pic.twitter.com/f6tYixU0Ru

— Motorhead (@BradMunchen) June 30, 2023

What’s more, Tesla appears to be keeping its Giga Shanghai at above 80 percent capacity utilization level by sacrificing the output of its other factories. Tesla had shipped around 9,000 units from its Fremont factory to Canada in 2022. From Q2 2023, however, Giga Shanghai was handling these export orders.

As per the tabulation by Troy Treslike, Tesla averaged a run rate of just 3,635 units per week at GigaBerlin during Q2 2023, significantly below the factory’s total capacity of around 8,000 units per week.

While Giga Shanghai is Tesla’s most profitable factory, the company appears to be bleeding dollars at its other factories. This situation is likely to pressure the company’s profit margins, particularly when one considers the fact that the EV giant’s annual capacity has increased by around 70 months in the last 12 months through Q1 2023 while its global ASP is down around 20 percent.

Of course, the company’s upcoming Q2 2023 earnings report will shed a much brighter light on its profit margins, which are widely believed to be under elevated pressure. This is giving the stock’s bears a much-needed lifeline.

Written by Rohail Saleem