Tesla’s logistics challenges overshadow record deliveries

© Reuters. FILE PHOTO: The Model Y is pictured at the opening of the new Tesla electric vehicle Gigafactory in Grunheide, Germany, March 22, 2022. Patrick Pleul / Pool via REUTERS / File Photo

By Hyunjoo Jin and Mrinmay Dey

– Tesla Inc said on Sunday that third-quarter deliveries of electric vehicles fell short of expectations, as logistical challenges overshadowed record deliveries.

The top electric-car maker said it was “increasingly challenging to secure vehicle capacity at a reasonable cost,” but some analysts were also concerned about demand for higher-priced goods due to a weakening global economy.

“The fringe economy is still having a negative impact on Tesla (NASDAQ: ), mostly logistics. But I think there’s some demand (issues) there,” Wedbush Securities analyst Dan Ives said on delivery told Reuters after the results.

“The auto industry is cloudy. Tesla is not immune.”

Ford Motor (NYSE: ) said last month that inflation-related costs in the third quarter would be $1 billion higher than expected, and a shortage of parts caused delays in deliveries.

Apple Inc. (NASDAQ: ). Bloomberg reported last month, citing people familiar with the matter, that the company is abandoning plans to ramp up production of new iPhones this year after an expected surge in demand failed to materialize.

“I think EVs are likely to have a tough time, just because people may be a little hesitant and less eager to buy something new,” said Ed Moya, senior market analyst at OANDA.

‘Crazy wave of deliveries’

Tesla delivered 343,830 electric vehicles, a record for the world’s most valuable automaker, but below analysts’ average estimate of 359,162, according to Refinitiv data. A year ago, Tesla delivered 241,300 vehicles.

The latest deliveries fell short of Tesla’s production of 365,923 vehicles, a rarity for the automaker that has delivered above or close to production in recent quarters.

“As our production continues to grow, it becomes increasingly challenging to secure vehicle capacity at a reasonable cost during peak logistics periods,” Tesla said in a statement on Sunday.

“Quiet the frantic end-of-quarter delivery wave to reduce acceleration costs and relieve pressure on the Tesla team,” Tesla CEO Elon Musk said on Sunday.

Last year, he said Tesla had a “crazy delivery wave” at the end of each quarter, as its Shanghai plant made cars for export to Europe and other countries in the first half of the year and then sold them in China.

Tesla again asked employees to help “deliver a large number of vehicles to eagerly waiting customers in the final days of the third quarter,” according to an email seen by Reuters.

Tesla said Sunday that it “has begun the transition to more even weekly regional vehicle manufacturing, which resulted in an increase in the number of vehicles in transit at the end of the quarter.”

Fourth quarter delivery push

Internal plans reviewed by Reuters show Tesla has set an ambitious goal of producing nearly 495,000 Model Y and Model 3 vehicles in the fourth quarter of this year.

The company’s production ambitions come against a backdrop of increasingly bleak global growth prospects, with Musk himself telling top executives in June that he has a “super bad feeling” about the economy and plans to cut jobs.

On the July conference call, Musk initially said that macroeconomic uncertainty could have some impact on demand for its electric vehicles, but when pressed for details by analysts, he said the company had no demand issues but production issues.

The automaker expanded capacity in Shanghai after a resurgence of COVID-19 cases forced factories to shut down and pushed deliveries to fall for the first time after nearly two years of record runs.

Tesla’s vehicle order backlog fell in September, especially in China, Tesla data tracker Troy Teslike tweeted.

Tesla said it delivered 325,158 Model 3 compact cars and Model Y sport utility vehicles to customers during the quarter, as well as 18,672 Model S and Model X premium vehicles. Meanwhile, Musk showed off a prototype of his humanoid robot Optimus Prime on Friday, predicting the electric car maker will be able to produce millions of cars and sell them for under $20,000 — less than $20,000. One-third the price of the Model Y.

Experts were impressed by the pace of development of Tesla’s humanoid robot, but they agreed with Musk, who said “there is still a lot of work to be done to perfect and prove Optimus Prime.”

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