The highly volatile shares of Tesla Motors dropped more than 12 per cent in after-market trading on Tuesday after the US electric car company failed to beat Wall Street’s hopes for deliveries of its Model S saloon in the latest quarter.
Elon Musk, chief executive, blamed a shortage of the lithium ion cells needed to power the company’s battery packs for the disappointment. He predicted that a recent supply deal with Panasonic would remove the bottleneck next year, though he added that this still left the need for a new “giga-factory” capable of doubling the world’s cell production capacity by the time Tesla launches a mass-market vehicle in three years’ time.
The fall, which came even as the company topped earnings estimates, highlighted the huge expectations that have built up this year as Tesla’s shares have soared fivefold, pushing its stock market value above $20bn.
The company announced that it had delivered 5,500 vehicles in the quarter, at the low end of the 5,500-5,700 range Wall Street had been expecting. Some analysts had anticipated a much bigger number, reaching as high as 7,000. Despite the disappointment, Mr Musk, raised the company’s full-year delivery forecast, lifting it by 500 to 21,500.
He also said that Tesla was holding back on promotional activities because it cannot produce enough vehicles, putting potential demand in North America at 20,000 a year with a similar volume in Europe.
Tesla also plans to begin sales in Asia next year, with the first deliveries in China scheduled for February, though Mr Musk said the company was not engaging in any marketing so as not to disappoint potential customers.
The volatility that has set in in Tesla’s share price in recent weeks follows an extended bout of euphoria for much of the year, which was stoked by initial strong product reviews for the S, a smooth ramp-up in production and news that the company had hit profitability earlier than expected, at least on a pro-forma basis.
Mr Musk has cautioned that the company’s share price may have risen too far, too fast, most recently two weeks ago when he said that the company had “a higher valuation than we have any right to deserve”.
Before the earnings came out, Tesla shares had ended the trading day at $176.80, or 9 per cent below the high point hit five weeks ago, the longest period they have gone without hitting a new record since March.
For the three months to the end of September, Tesla reported pro-forma earnings per share of 12 cents on revenues of $603m. Wall Street had been expecting earnings of 11 cents a share, excluding one-time items, on revenues of around $550m. A year ago, it registered a loss of 92 cents a share on sales of $50m. Based on standard accounting rules, the company reported a loss of $38m, or 32 cents a share.
Tesla’s gross profit margin on its automotive sales reached 21 per cent in the latest quarter, compared to the 25 per cent Mr Musk had predicted it would hit by the end of the year. The gross margin had already risen from 5 per cent in the first quarter to 14 per cent in the second.