What Tesla’s improved second-quarter deliveries mean ahead of earnings announcement

Tesla (TSLA) stock has shifted gears and is rising in Tuesday’s session after beating second-quarter EV delivery estimates. The EV maker reportedly produced 410,831 vehicles, delivering 443,956 vehicles. Tesla continues to struggle with price wars from foreign EV makers in the Chinese auto market.

In Market Domination, Barron’s editor-in-chief Al Root talks about the electric vehicle maker’s shipment data and what it might indicate about Tesla’s next earnings report, due out July 17, and the pricing of its vehicles.

“Part of how they did it was simply meeting or exceeding expectations. Estimates always tend to go up, and that was the case this time,” Root says. “So it was a good quarter, and again, I think there was a lot of concern about two consecutive year-over-year declines.”

For more expert opinions and the latest market updates, click here to watch the full episode of the Market Domination podcast.

This post was written by Luke Carberry Mogan.

Video Transcription

Tesla shares are rising after the electric vehicle giant posted upbeat delivery results on Wall Street and was pleasantly surprised by a lower-than-expected drop in deliveries of nearly 5% from a year ago.

Join us.

Now we’d like to invite Baron’s deputy editor-in-chief, Al Root Al, to join the discussion.

Good to see you.

So let’s talk about the numbers that just came out from Tesla. They’re better than expected because if you look at the market reaction, they were very excited about the numbers that were released this morning.

Does this tell us that Tesla is the worst company in its history?

Yes, I think if we look at the reaction today, the message is that the worst is behind us.

Well, several notes from Wall Street basically indicate that.

And you know, one of the interesting questions I got at the beginning of the day was: How did they do it?

I mean, it was a very good quarter, better than the first quarter when we sold about 387,000.

The story continues

But as the chart shows, it is still a decline on a yearly basis.

So part of their success was simply meeting or exceeding lowered expectations.

Estimates always have a tendency to get delayed in printing, and that certainly happened this time.

So it was a good quarter.

And again, I think there was so much concern because of, you know, two consecutive declines in a year.

How bad will it be?

Will it be 420,000 units?

You know, it wasn’t that bad at all.

The next date on the Tesla investor calendar is July 23, the day the company announces its financial results.

What do you expect to hear there?

Are there any specific metrics you plan to focus on when printing?

I’d like.

So, you know, deliveries are related to this, right?

You know, they also accumulated 9.4 gigawatt-hours.

You know, that falls into a different category of their business.

That was, that was a record quarter, you know, over 100% growth.

That means more revenue.

And then, since deliveries are a little bit better than expected, I’ll go straight to the operating profit margin, but in the first quarter, the operating profit margin was about 5.5%.

Margins fell about 11% a year ago and have been falling steadily since then as prices fall and economic growth slows.

I would like to see the situation on the streets reversed, expecting around 8%.

So the street is expecting some improvement.

So let’s take a look at the operating margin and see if there’s a reversal in the declines in earnings estimates.

This result is so good that there was no need to lower profit estimates for the quarter.

And you can expect a certain standard rhythm, you know, and be optimistic about the rest of the year, you know, quarter one, quarter two is the worst part of the year, and then solidifying this idea that Tesla can revive in the second half and then in 2025.

So, with that in mind, I guess my question is about pricing.

Do you think the price wars Tesla had to fight to bring vehicle prices down really happened all over the world?

This may not have that much of an impact given the pressure this has put on margins.

Well, interestingly enough, going back to what you said, Tesla produced a lot fewer vehicles than it sold.

So Tesla’s inventory is lower, which reduces the pressure on them to lower prices even further and get rid of some inventory, but it’s just one company, right?

They account for about 50% of electric vehicle sales in the U.S. and about 20% of electric vehicle sales globally.

So, you know, other people have to play by the pattern, every growth in China was better.

But again, this result was somewhat influenced by price.

I think you could say the same thing, that prices will likely continue to trend downward.

So it won’t necessarily be a question of pressure.

This was in 2023 and early 2024.

Some delivery results for not only Tesla, but also Lee Byd’s Rian Neo XB indicate that the vehicles are selling at such levels.

So, you know, car companies can say, okay. You know, we’re good, we can just operate at these levels.

But again, it’s not entirely up to Tesla, at least from their perspective, there is no pressure to lower prices further.