• Breaking News

    Tesla shares tank after Q1 shipments fall short and the automaker warns on income

    Tesla on Wednesday announced it delivered about 63,000 cars in the first quarter, below analysts' expectations of 76,000 deliveries. It also said it produced approximately 77,100 cars during the quarter.

    The company also warned that first-quarter income will be "be negatively impacted" because of "lower than expected delivery volumes and several pricing adjustments."

    Shares of the auto maker were down more than 7 percent in premarket trading Thursday.

    However, the company reaffirmed full-year guidance of 360,000 to 400,000 vehicle deliveries in 2019, which should reassure investors given this quarter's miss. It also said that approximately 10,600 vehicles were in transit to customers, reflecting unexpectedly strong demand in China and Europe toward the end of the quarter.

    The company wrote that one challenge was trying to deliver cars around the world when they were manufactured only in one factory in the San Francisco Bay Area, meaning that production could continue to outpace deliveries. The company is planning to build a factory in Shanghai, China, to meet Chinese demand.

    Breaking the numbers down by model, the company says it delivered approximately 50,900 Model 3s and 12,100 Model S and X vehicles. It produced 62,950 of its new Model 3 vehicles and 14,150 Model S and X cars.

    Wedbush analyst Dan Ives characterized the miss as bad but not "apocalyptic."

    This was a disappointing performance by Tesla, although the key Model 3 number was within the area code of Street expectations...The overall deliveries missed Street expectations the all-important Model 3 deliveries were above whisper expectations and exceeded 50k this quarter which will be the focus of many bulls on the Street. That said, European and Chinese deliveries hit anticipated delivery logistics and were the main culprit for the overall miss which was disappointing to see and resulted in a soft quarter with profitability in the red for Musk & Co. Importantly, with Model 3 being the linchpin of growth and future success for Tesla and assuming roughly 7k of the in-transit cars are Model 3's in Europe, the overall Model 3 delivery number would have been closer to 57k and exceeded Street expectations. Overall, the Street was expecting an apocalyptic quarter and Model 3 deliveries were better than feared by many with 50k Model 3 vehicles the "line in the sand" although the overall number was clearly rocky and represents an "air pocket" quarter in our opinion.

    Prior to the news, investors had expected demand for Tesla's electric vehicles to slide during the first quarter as buyers of its energy efficient cars lost some key federal tax credits and the company faced falling demand for its luxury lineup.

    "We do not find this slowdown in U.S. demand to be totally surprising or alarming," Bernstein analyst Toni Sacconaghi told investors in a research note Friday. He noted that Tesla's most expensive Model 3s accounted for "an extraordinary" 33 percent of all sales of sedans priced between $40,000 and $60,000 in the second half of 2018. The average selling price for a Model 3 sedan, Tesla's most popular vehicle, was $57,000 last year, according to data compiled by FactSet.

    The first quarter also reflects demand for Tesla electric vehicles without the full $7,500 federal tax credit used to gin up demand for energy efficient cars. The credit for Tesla buyers was halved to $3,750 beginning Jan. 1.

    CEO Elon Musk has attempted to stoke demand by starting to sell the long-awaited $35,000 Model 3, Tesla's cheapest car, and generate more interest in the company by unveiling another highly anticipated vehicle — Tesla's Model Y crossover utility on March 14. Two of the three vehicles Tesla currently sells are sedans, which have fallen out of favor with customers who increasingly prefer crossovers, SUVs, and pickup trucks.

    Watch: What investors should watch ahead of Musk's faceoff with the SEC

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