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Tesla delivers a record 405,278 cars in the quarter, but misses the target

(Bloomberg) — Tesla Inc. delivered fewer cars than expected last quarter despite offering strong incentives in its biggest markets, fueling worries about demand that contributed to the worst month and year for the electric car maker’s shares since its initial public offering in 2010.

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The company delivered 405,278 vehicles to customers in the past three months, short of the average estimate of 420,760 compiled by Bloomberg. While the total was a quarterly record for Tesla, the company opened two new assembly plants last year and still fell short of its goal of expanding by 50%.

It is also the third quarter in a row that deliveries have missed estimates.

Several analysts cut price targets on the stock on Tuesday, and JPMorgan Chase said Tesla may never again meet its multi-year sales target of 50%. “Our base assumption is that year-over-year growth (while remaining impressive overall) is likely to slow each year from now,”[ads1]; analyst Ryan Brinkman, who has a similar sell rating on the stock, wrote in a research note.

Tesla fell 4.1% to $118.15 as of 8:18 a.m. in New York before the start of regular trading.

After CEO Elon Musk predicted an “epic” end to the year, Tesla cut car prices and production in China, then offered $7,500 in discounts in the US. Concerns about rising interest rates, inflation and other economic headwinds — plus alarm over Musk’s antics at Twitter, which he now owns — sent Tesla shares down 37% in December and 65% last year.

“We believe Tesla is facing a significant demand problem,” Toni Sacconaghi, a Bernstein analyst with a similar sell rating on the stock, wrote in a report Monday. “We believe Tesla must either reduce its growth targets (and operate factories below capacity) or maintain and potentially increase recent price cuts globally, which squeezes margins.”

Read more: Tesla stock had its worst year ever. That doesn’t make it cheap

Tesla increased deliveries by 40% to 1.31 million last year, excluding the 50% average annual growth rate the company has said it expects to achieve over several years. Production increased by 47% to 1.37 million.

The company produced 439,701 vehicles in the fourth quarter, exceeding deliveries by 34,423 units. Tesla said it continued to transition to “a more even regional mix of vehicle builds,” which led to another increase in the number of cars in transit at the end of the quarter.

“Tesla is selling cars, and the auto industry is slowing down,” Gene Munster, managing partner at Loup Ventures, said by phone. “They are still struggling with logistics, and the gap between production and deliveries grew from last quarter.”

Musk said during Tesla’s latest earnings call that Tesla was trying to “even out” deliveries throughout each quarter so that the company no longer has a wave of deliveries concentrated at the end of each period. Still, design chief Franz von Holzhausen tweeted that he reported to a delivery center in Southern California on New Year’s Eve.

The rebates Tesla offered in the U.S. toward the end of the quarter matched the maximum tax credit that electric cars are eligible for under the Inflation Reduction Act that President Joe Biden signed in August. The automaker suffered a setback in this regard late last month when the Internal Revenue Service published a list of electric and plug-in hybrid vehicles eligible for federal tax credits.

Most of Tesla’s models will not qualify under current interpretations of the law because they are either too expensive or use batteries that are not fully compatible. The only vehicle likely to pass muster is the seven-seat version of the Model Y, which means “consumers may have to order and spend an extra $3,000 for a third row they don’t want/need on the Model Y to qualify for a tax credit,” Toni wrote Sacconaghi, an analyst at Bernstein who also has a sell rating on Tesla’s stock, in a research report.

Musk took issue with the IRS eligibility list in several tweets, writing “this is messed up” on Jan. 1, and on Monday questioned whether the company was being penalized for making the Model Y too mass-efficient.

Tesla does not break out sales by region, but the US and China are the biggest markets, and 95% of sales in 2022 were of the Model 3 sedan and Y crossover.

The company makes the Model S, X, 3 and Y at its factory in Fremont, California. The Shanghai factory produces the Model 3 and Y, and it began delivering the Model Y from its newest factories in Austin and near Berlin in the first half of last year.

While Musk delivered Tesla’s first Semi trucks to PepsiCo Inc. in December, the company did not report any deliveries of the model in its quarterly report. The automaker separately announced that an investor day is planned for March 1, where it will discuss long-term expansion plans, a next-generation vehicle platform, capital allocation and other topics.

–With assistance from Craig Trudell.

(Updates with analyst comments from the fourth paragraph.)

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