Chalk this one up to expectations being too high, even for Tesla CEO Elon Musk. Despite beating the street by a penny and reporting earnings that were above estimates, Tesla shares were slammed in after-hours trading.
Blame it on Tesla reporting good, but not great numbers for the quarter.
(Read more: Tesla beats expectations, but shares drop sharply)
During a conference call with analysts, Tesla CEO Elon Musk said, "We're production constrained, not demand constrained." Musk went on to explain Tesla was limited by the supply of lithium-ion battery cells needed to make the battery packs that go in Tesla vehicles.
Model S Deliveries Disappoint
The primary number skeptics and short sellers are focusing on with Tesla earnings is the delivery of 5,500 Model S vehicles. It was 500 more than the company's guidance at the end of Q2, but below the 5,700-5,750 deliveries many on Wall Street were projecting.
With Tesla ramping up Model S production in the third quarter to 500 per week, Tesla built approximately 6,500 vehicles in the quarter. So why did the company only deliver 5,500? Tesla says it's building up its inventory pipeline for European deliveries. Tesla still has a Model S order backlog in the U.S., though it has dwindled considerably from a year ago when it stood at close to 20,000 cars.
Also, Tesla says it plans to increase Model S production over the next several quarters.
(Read more: Tesla hires Apple exec to develop new models)
R&D Expenses, Europe Demand Growing
As Tesla gears up for the Model X coming out at the end of next year and the Model E by 2017, Tesla is increasing its R&D spending; it will increase by 25% in the fourth quarter.
Meanwhile, Musk told analysts he sees demand for the Model S growing in Europe. "Europe now, is where North America was back in February or March," said Musk. Eventually, the Tesla CEO sees 60% of its sales being overseas.
As for China, Musk says the company will start delivering cars there in the first quarter.
Questions? Comments? BehindTheWheel@cnbc.com.