Tesla Warning: Global Factory Shutdown to Cause Decline in Third Quarter Production and Deliveries

Although the new version of Model 3 may boost Tesla's profits, the company's performance this quarter may be lower than expected.

In a report, Deutsche Bank analyst Emmanuel Rosner revealed that Tesla warned at an investor conference in Munich that its production and delivery volumes would decline in the third quarter of this year due to factory shutdowns worldwide.

Rosner commented that the market's consensus expectation for Tesla's delivery volume in the third quarter is that it will remain flat compared to the second quarter, but there is downside risk to this expectation.

Rosner also believes that Tesla's profitability in the third quarter is at risk because the company is selling inventory vehicles at a discount and cost savings are limited.

Tesla stated that after the third quarter, the new version of Model 3 may experience "stable" demand. Rosner commented that the new Model 3 could contribute to Tesla's profitability because the new version has a higher selling price and potentially lower costs compared to the old version.

In summary, Deutsche Bank still expects some risks in the market's expectations for Tesla in the years 2023 to 2024, but Deutsche Bank continues to be optimistic about Tesla's long-term opportunities.

On the day Rosner released the report, Tesla's stock price fell nearly 4.5% in early trading on Wednesday, narrowing the decline to less than 3% at midday, after a strong rebound of nearly 5% on Tuesday.

Before Rosner's report was released, Tesla just started selling the refreshed version of Model 3 in China last Friday. Surprisingly, the price of the rear-wheel-drive version of the new Model 3 in China is 259,900 yuan, which is nearly 30,000 yuan more expensive than the old version. This not only deviates significantly from the expected price of 200,000 yuan, but also differs greatly from Tesla's strategy of lowering prices to maintain sales volume this year.

An article from WallStreetCN•Jianzhi Research suggests that the price increase is mainly to quickly deplete the inventory of the old Model 3.

The article points out that globally, the production of Tesla Model 3 and Model Y has exceeded sales by about 78,000 units in the past year. If the price of the new Model 3 is lower than that of the old version, consumers who are already tired of the old version will fully shift to the new model, and there may even be cancellations of orders for the old version, which is obviously detrimental to inventory.

Therefore, the article believes that Tesla may not necessarily avoid price reductions, but rather use the high pricing of the new model to deplete the inventory of the old model. Before deliveries in the fourth quarter, Tesla may reduce prices to clear inventory. Once the new model starts stable deliveries, it is not ruled out that Tesla will introduce price discounts.

Tesla CEO Elon Musk mentioned at the second-quarter earnings conference that if the economic environment continues to deteriorate, Tesla will continue to lower car prices to ensure sales. In mid-August, Tesla announced the second round of price cuts for the second half of the year in China: the Long Range and Performance versions of Model Y were reduced by 14,000 yuan, with a decrease of 4%. The Long Range version even dropped below the 300,000 yuan mark for the first time, reaching 299,900 yuan; Model 3 did not directly offer a price reduction, but provided an 8,000 yuan insurance subsidy, effectively reducing the price by 3.5%; The high-end models, Model S and Model X, can enjoy price discounts ranging from 54,000 to 70,000 yuan.

Earlier this week, the estimated data released by the China Passenger Car Association showed that Tesla's price cuts in China have taken effect. In August, Tesla's wholesale sales in China reached 84,159 units, a year-on-year increase of 9.3% and a month-on-month surge of 31%.