Tesla shares fell by a whopping 10.7% on Thursday as the company missed the production and delivery targets for the first quarter of 2019. This will surely hurt the profit margins for Tesla, and investors have reacted to this disappointing turnout by dropping their Tesla shares on the market.
Tesla recently announced that it delivered 63,000 cars in Q1 of 2019, which is 13,000 below the forecast of analysts for the company. Deliveries of the Tesla Model 3 also fell short of the expected delivery figures by about 1,500 cars.
The company also said that it produced 77,100 cars in the first quarter of 2019. The announcement came as a setback for the investors of the company, and the Tesla share prices fell immediately after the announcement.
The pioneering company behind electric cars in America also announced that their profit margins will take a big hit due to lower than expected delivery figures and several price adjustments that the company made during this period.
Analysts have noted that the road ahead for Tesla will be even more challenging as the company struggles to keep prices down of their models. This will result in lower demand as customers will look elsewhere for a better value proposition.
Despite the setback from the first quarter, the electric car maker has assured its investors that the company is set to hit the production target of 360,000 to 400,000 by the end of 2019. The company also said that there were 10,600 of their vehicles still stuck in transit, which means that Tesla’s European and Chinese markets have seen higher than expected demand for its cars.
The company stated in its announcement that it was proving to be very challenging to deliver cars around the global markets due to having only one factory in the US. This means that the trend will continue where Tesla’s production margins will continue to be outpaced by its delivery figures. The company is building a second factory in Shanghai, China, which will help it to access the Chinese electric car market and keep the costs of its Model 3 low for Chinese consumers.
Even before the announcement was made, investors were expecting a lower than expected delivery figures for Tesla as the company lost a lot of key federal tax credits from America and the demand for its luxury electric cars sliding.
The CEO of Tesla, Elon Musk is trying to remedy the situation by starting to sell its cheapest model yet, the Model 3 for $35,000. The company also launched another Model, dubbed the Model Y which is a crossover utility vehicle. The Model Y was launched on March 14 amidst growing interest from consumers for crossover vehicles and SUVs.
Tesla has three models in its lineup currently, and two of those models have fallen out of favor from the American consumers as they look for more efficient and cheaper electric vehicles. The $7,500 federal tax credit that Tesla was once enjoyed has stopped, which means that the prices of their models have increased recently, which is another negative sign for the company.