Tesla Analysts Slash EV Delivery Forecasts After Turbulent China Quarter

After starting the second quarter with its biggest profit and highest vehicle deliveries in company history, there was no looking back. The startup pains at the electric-car maker's newest plants, along with a severe Covid-related lock-down there, has caused analysts to slash their forecasts for global delivery numbers.

The Austin-based company, which typically posts delivery and production numbers a day or two after the quarter ends, may report delivering about 258,000 EV to customers worldwide. Despite the addition of new factories in Germany and Texas, it is down from a record first quarter delivery of over 300,000. It is below a consensus estimate of 315,000 deliveries at the beginning of the quarter.

Nelson Garrett, equity analyst for CFRA, says the key question is the magnitude of the decline and whether the factory was able to support volumes.

After a period of relative stability in terms of profit and production growth, the Chinese market has begun to slow. In addition to a lower pace of deliveries, the quarter also brought the first large scale job cuts that Musk, who expects the U.S. economy to fall into recession, said will affect about 3.5% of employees worldwide. The elimination of about 200 jobs for people working with the Autopilot team was one of the firings this week. Tough startup conditions at the new Berlin and Austin Gigafactories are costing the company Billions.

Musk said in a May 31 interview that the Berlin and Austin factories are huge money makers. Berlin and Austin are losing billions of dollars because of a lot of expenses.

In the company's first-quarter results call, Musk predicted that the current three-month period would see deliveries remain robust.

Despite new issues that arise, I think we will see a record output per week from GigaShanghai this quarter, even though we are missing a few weeks. Vehicle production will probably be the same in Q2 as it was in Q1. It is1-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-6556

Since then, neither he norTesla has provided updated guidance.

Current delivery forecasts range from a low of 232,000 to a high of 245,000, according to analysts. More bullish forecasts include 270,000 from Morgan Stanley, and 277,000 from Dan Ives.

The extent to which slower production and sales in China, which saw EV demand plummet in April and May, will be a key factor to watch. Lower production costs allow the company to enjoy higher margins.

Brian Johnson said in a research note that second-quarter production and margins would be disappointing. He thinks that the company will deliver 251,000 vehicles for the quarter.

The assembly line modifications that will allow the plant to increase production later this year will cause it to be temporarily shut down in July. As operations smooth out in Texas and Germany, the company should be able to increase production.

The good news is that investors seem to understand the operational challenges of the company and volumes should rebound in the second half of the year.

The company's shares fell 3% in the afternoon. The stock has been falling.