Tesla shares fell as much as 10.7% Thursday as investors reacted to disappointing delivery numbers, which will hurt profits in the first quarter.
Late Wednesday, Tesla announced it delivered about 63,000 cars in the latest period, below analysts' expectations of 76,000 deliveries. Deliveries of the Model 3 midsize sedan, considered a key product for Tesla, were 50,900, below a FactSet estimate of 52,450.
Tesla also said it produced about 77,100 cars during the quarter.
By midmorning Thursday, Tesla was trading at $265.90, down 8.8% from Wednesday's close.
The electric car maker also warned that first-quarter income will "be negatively impacted" because of "lower than expected delivery volumes and several pricing adjustments."
"Tesla continues to struggle as a 'real car company,' with demand collapsing for the tired Model S/X platforms and higher priced versions of the Model 3," Cowen analyst Jeff Osborn said in a note Thursday.
However, the company reaffirmed its full-year forecast of 360,000 to 400,000 vehicle deliveries in 2019, which could reassure investors given this quarter's miss. It also said about 10,600 vehicles were in transit to customers, reflecting unexpectedly strong demand in China and Europe toward the end of the quarter.
The company said 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. Tesla is planning to build a factory in Shanghai to meet Chinese demand.
Breaking the numbers down by model, the company said 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 encourage 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. He also expected to generate interest 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.