The Tesla fourth quarter and year end delivery numbers are as follows, according to a company press release:
Total deliveries Q4 2022: 405,278
Total production Q4 2022: 439,701
Total annual deliveries 2022: 1.31 million
Total annual production 2022: 1.37 million
Breaking it down a little more by model groupings, we have:
Tesla Model 3/Y production Q4 2022: 419,088
Tesla Model 3/Y deliveries Q4 2022: 388,131
Tesla Model S/X production Q4 2022: 20,613
Tesla Model S/X deliveries Q4 2022: 17,147
Tesla Model 3/Y production 2022: 1,298,434
Tesla Model 3/Y deliveries 2022: 1,247,146
Tesla Model S/X production 2022: 71,177
Tesla Model S/X deliveries 2022: 66,705
Those numbers represent a 40% increase in sales as compared to 2021. (Tesla doesn’t actually report sales, only deliveries. In general, getting information about what is going on inside the company is like asking the Sphinx for directions to the nearest Starbucks.)
But financial markets are putting a gloomy face on this news. Only 40%? What about Elon’s promise of 50% growth year over year from now until the end of time? He failed to deliver, just like he failed to deliver on autonomous driving, a $25,000 car, unbreakable window glass on the Cybertruck, and so much more. There is a lot of foot stomping in the hallowed halls of Wall Street today. How dare Tesla only increase sales by 40%? It’s an outrage!
CNBC reports the consensus of analysts’ estimates compiled by FactSet as of December 31 was that Tesla was expected to report deliveries of around 427,000 for the fourth quarter.
Reading The Tesla Tea Leaves
At the time of the company’s third quarter earnings call, Tesla wrote, “Over a multi-year horizon, we expect to achieve 50% average annual growth in vehicle deliveries. The rate of growth will depend on our equipment capacity, factory uptime, operational efficiency, and the capacity and stability of the supply chain.” 50% growth is clearly unsustainable and anyone who thinks such a thing is possible is a fool. And yes, that includes you too, Elon.
Tesla has in fact started manufacturing cars in Germany and Texas. It has also expanded production at its factory in Shanghai. But not even the great and powerful Musk can counter the economic crosscurrents caused by war, famine, inflation, climate change, and a resurgent Covid-19 epidemic that is pummeling the Chinese economy. By now, most people know Elon is as much about hype as he is about reality. He is close to being a flim flam man, a PT Barnum style promoter, and a spinner of fables. If Tesla stock is down more than 60% since this time last year, it is as much because Musk has burst his own self-created balloon with his idiotic attempt to control what every person on Earth can and cannot say on the internet. In tennis, it is called an unforced error. In the military, it is known as a circular firing squad. Live by the sword, die by the sword, Elon.
Elon Agonistes
In recent months, Tesla has appeared vulnerable to competition from established carmakers and to rising borrowing rates which made its electric cars more expensive for people taking out loans. These are indications that the realization that Tesla is mortal contributed to the stunning decline in Tesla shares in 2022 and led investors to focus more on conventional measures like sales and profits rather than dreams of world domination, says the New York Times.
Martin Viecha, head of investor relations at Tesla, said on Twitter that the gap between deliveries and production reflected vehicles in transit to customers. “No way to sugarcoat this,” Gary Black, managing director of the Future Fund, an investment fund, said on Twitter. He predicted that analysts would reduce their estimates of Tesla sales and profits in 2023. Tesla will report 2022 earnings on Jan. 25.
According to Investors.com, China’s economic activity is tumbling as the abrupt end of strict Covid rules spur massive waves of infections. The official manufacturing index fell 1 point in December to 47, the government said on December 31. The non-manufacturing PMI, which covers service sector and construction activity, fell 6.1 points to 41.6. Both are the lowest since February 2020, when Covid-19 first hit the country. Readings below 50 signal an economic contraction, it says. Meanwhile, Caixin’s China manufacturing index edged down 0.4 point in December but business confidence hit a 10-month high.
Building Compelling Electric Cars
Adding to all the other challenges facing Tesla is the fact that there is a flotilla of other electric car manufacturers following in its wake and they are beginning to sell lots of cars. South China Morning Post reports that BYD surpassed Tesla to become the world leader in electric car sales. It says BYD delivered 1.86 million units in 2022, most of them to customers in mainland China. Yes, it’s true that a significant number of them were plug-in hybrids, but they also tend to offer longer battery range in China than the PHEVs offered by manufacturers in Europe, the US, South Korea, and Japan.
Sales of BYD battery electric cars rose 4% from November to 235,197 units last month, the company said in an end-of-year statement to the Hong Kong Stock Exchange. BYD more than tripled its 2022 sales to 1.86 million units, most of them in China. SCMP says BYD is selling most of its electric cars to taxi fleets and budget conscious households, underscoring how layoffs in China’s technology industry and Covid pandemic are pushing buyers downmarket towards cheaper, locally made EVs, instead of imported models or higher-end foreign brands like Tesla.
“BYD is a beneficiary of the ‘consumption downgrade’ as the Chinese economy slows,” said Eric Han, a senior manager at Suolei, an advisory firm in Shanghai. “Its mass market vehicles are well received by Chinese middle-class consumers, as they are viewed as value-for-money products.” Most BYD models are priced between 100,000 yuan and 200,000 yuan ($29,000), a bargain compared with Tesla and other competitors such as Nio and XPeng, whose technology-packed models sell for more than 300,000 yuan each.
Prior to the recent loosening of Covid lockdown policies which resulted in some of the most widespread civil unrest in China in recent memory, those restrictions wreaked havoc on China’s economy, the second largest in the world. As a result, consumers have been tightening their purse strings, particularly on big ticket items like cars.
That illustrates one possible flaw in Tesla’s quest to be the largest manufacturer of electric cars in the world. BYD, Nio, XPeng, Hyundai, Volkswagen, Mercedes, BMW, Peugeot, Honda, and every other carmaker in the world offer many different models to appeal to all sorts of customers. Tesla basically sells two mass market cars — the Model 3 and the Model Y. Elon has been dismissive of the idea that Tesla will offer a less expensive car anytime soon, saying he already has too many things on his plate — one of which, of course, is deciding what every person on Earth can and cannot say on the internet. It is fairly clear by now that Tesla needs to expand its product offerings to appeal to more buyers.
Still, 40% growth year over year is nothing to sneeze at. Tesla is now at the point of becoming a mature company, one that will find its stock market performance subject to traditional measurements like profitability, price to earnings ratios, and the like. The “run around and break things” mentality of most tech companies won’t play forever. What we are seeing is not so much a contraction of Tesla’s future so much as a transition to a more mature company where hype and hopes are de-emphasized and replaced by actual performance in the marketplace.
Years ago, Elon was begging other manufacturers to build compelling electric cars. As the old expression goes, “Be careful what you wish for. You just might get it.”
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