Where most car manufacturers deliver their vehicles by water, this is not the case with Tesla. Indeed, huge waves of deliveries take place in the last weeks of each quarter. We will return to this phenomenon in detail and try to explain why Tesla is still forced to do this.
In 2022, Tesla delivered more than 1,300,000 electric vehicles, but if you look at it in more detail, the months follow each other and they are not the same. Some months there is also almost no registration in Europe of Tesla Model 3 and Model Y, while at other times these two trendy cars are a hit.
It is not the will of Tesla not to deliver for a certain period of time, but it is a limitation that the company Elon Musk suffers from due to various factors. Between the pressure of quarterly financial results, logistical headaches and price adjustments, let’s take a look at what makes Tesla seasonal.
pressure on the stock market
It’s an exercise familiar to all major publicly traded companies, but quarterly financial results are indeed the primary reason for Tesla’s quarter-end panic. Indeed, analysts and shareholders alike eagerly await each quarter’s results to determine their investment strategy and adjust targets up or down.
This is why Tesla’s stock market activity is centered around the end of the quarters, with turmoil a few days before and possibly movement a few days after if the results aren’t exactly what was expected. For example, at the very end of the year 2022, Tesla closed its fiscal fourth quarter, and during its results release, the manufacturer revealed that it had overproduced compared to the vehicles purchased. In anticipation of the poor results, the share price had fallen drastically until the end of December.
In practice, therefore, 34,000 Teslas have been produced without being delivered, marking the largest discrepancy in the brand’s history between production volume and sales volume. Some therefore began to see a drop in demand for the Texas company’s vehicles, while others considered the prices simply too high at the time. The latter were right, because in the vast majority of countries in the world, prices fell drastically in early 2023.
If the pressure exerted by the stock market is very real – it’s also what prompted Elon Musk to want to withdraw Tesla from the stock exchange – it’s not the only constraint Tesla has to compose that forces him to retire his vehicles to be delivered at the end of each quarter. Logistical headaches are indeed present, making it difficult to deliver across the water.
Delocalized production
When Tesla only sold its vehicles in the United States, the quarter-ends were already chaotic. So it is not a phenomenon that has occurred recently, but given the exponential increase in the manufacturer’s production capacity, it has grown strongly in recent years.
In practice, the method adopted in the United States from its inception has been copied in other Tesla plants, and this becomes a problem as still recognized Elon Musk in October 2022. The logistical reasons for the delivery of many vehicles at the end of the quarter are easy to understand: the vehicles have to travel thousands of kilometers by boat, train or truck before they are delivered to the end customer.
Taking the American example, back when all vehicles were produced at the Fremont plant in California, the first six weeks of each quarter were devoted to the production of cars for export, while the other six weeks were devoted to the production of vehicles for the local market.
Once the first six weeks of the quarter have passed, the vehicles produced for Europe or Asia are shipped by ship, then by truck or train to their final destination, where customers can receive delivery. If we consider that the journey takes about three to four weeks, which means that Tesla has a maximum of three weeks to deliver the majority of its vehicles in Europe or Asia before the end of the quarter.
Since then, we have been well aware of this “end of quarter” phenomenon in France almost all vehicles delivered in France come from China or the United States. Vehicles produced in January 2023 cannot be delivered to France until the end of March, and it is essential for Tesla to deliver them before March 31, otherwise sales will only count for the second quarter.
The US factory example is the same for Tesla’s most productive factory, the Shanghai Gigafactory. The first weeks of each quarter are produced for cars destined for Europe, and the second part of the quarter is dedicated to the local market. In this way, vehicles leaving the factory at the end of the quarter can be delivered very quickly, sometimes even directly to the factory.
It is easy to understand that with such a delivery system the slightest delay can have colossal consequences and that the margin of error between the vehicles produced and the vehicles purchased by customers must be kept to a minimum, otherwise thousands of cars would be left without owners, within weeks thousands of miles from the factory.
Months without registration
It often happens that Tesla does not appear in a Top 10 registrations in the first months of a quarter. As you will have understood, this is the demonstration of Tesla’s production and delivery method, which does not allow the delivery of vehicles produced over time on other continents.
Tesla’s quarterly delivery wave continues in Europe. The zigzag effect is the result of very low deliveries in the first month of the quarter and very high deliveries in the third month.
The ideal scenario would be flat deliveries every month. 9,212 in January was a step in the right direction. pic.twitter.com/3TERQYSOUC
—Troy Teslike (@TroyTeslike) February 12, 2023
Above is a graph showing the effect of waves of Tesla deliveries in Europe. Specific, deliveries during the first month of each quarter represent only 5 to 10% of the quarter’s deliveries, while those of the third month sometimes represent up to 80%.
Tesla is therefore forced to offer solutions to deliver thousands of vehicles to the assembly line in a very short time, sometimes in poor conditions. The manufacturer currently has no solution to this concern, as long as it does not agree to a smooth export.
However, there is a glimmer of hope as we look to the future as ramping up Tesla’s new Gigafactory could be a partial solution.
A less contrasting future
Tesla started with a factory in California, but it now has several giga factories on different continents. The Shanghai Gigafactory was the first to cross US borders, and today it is the company’s most productive factory, with annual production capacity exceeding one million vehicles.
In Europe, the Gigafactory in Berlin is now fully capable of producing 5,000 vehicles per week, or about 250,000 per year, and this number continues to rise. Since then, the Gigafactory in Austin, Texas has grown from scratch, and also produces for the local US market.
Tesla recently confirmed the future location of a new factory in Mexico, bringing the number of factories for the production of the vehicles to five soon. And each factory will strive to largely absorb local suppliesso that the Tesla Model Ys delivered in France no longer come from Shanghai in China or Fremont in California, but from Europe.
This is already the case today for the Tesla Model Y Performance and Grande Autonomie, but all Tesla Model 3s sold in France are still produced in Shanghai, as is the Tesla Model Y Propulsion. The Tesla Model S and Model X will continue to be produced in Fremont, California, and exported around the world. Since volumes for these models are much lower than for the Model 3 and Model Y, this should not change in the foreseeable future.
Still, for now Tesla must sell its production before the end of each quarterand if the manufacturer has exported more vehicles than they should, they must use certain levers to try and crack the undecided ones.
Offers at the end of the term
The more volumes produced by Tesla increase, the greater the risk of being left with unsold items at the end of the quarter. That’s why the company regularly resorts to end-of-quarter price adjustments, which we communicate on a regular basis. Some connoisseurs even voluntarily choose not to order a vehicle and wait until the last minute to find the right deal on the manufacturer’s website..
In practice, this is sometimes related to the options offered (paint, rims, white interior, towbar or even improved Autopilot), and sometimes to discounts on the final price. The end of 2022 had also allowed some to find a Tesla Model Y while taking advantage of the maximum environmental bonus, something impossible with the list prices of the time.
In addition to these discounts or options offered, Tesla sometimes allows itself to add free Supercharging, giving you a few months of eye-driving for whoever picks up their car at the right time. More recently, Tesla even revived the famous referral program from the ashes, increasing the rewards offered before the end of the first quarter of 2023.
Nothing tells us Tesla’s delivery waves won’t subside, but at the moment they are sometimes very good deals for end customers. If Tesla’s logistical headaches are very real as long as every factory can’t meet local demand, it’s clear that for the customer, this can become an easy way to lower the price of your new electric car.
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