While You’re here‘s (NASDAQ: TSLA) The explosion in shipments in the third quarter grabbed the headlines due to their record levels and significant year-over-year growth, one particular element of the report deserves a closer look: a sharp rebound in shipments of the most expensive flagship models of the electric car company – the Model S and X.
Here’s why a rebound in sales of these vehicles is good news for Tesla investors.
In January, Tesla unveiled new versions of its Model S and X vehicles. The changes included slight improvements to the exterior of both vehicles, significant changes to their interiors, and new performance upgrade options.
As exciting as the upgrades are to potential buyers of the Model S and Model X, the downside was that Tesla had to put production on both vehicles on hold so Tesla could upgrade production lines at its Fremont plant in France. California. Production was not due to start until March. Even then, it would take time for production to return to full capacity.
As a result, the combined quarterly deliveries of the S and X models increased from around 19,000 in the fourth quarter of 2020 to just over 2,000 in the first quarter of 2021. Deliveries were even worse in the second quarter, reaching less than 2,000. .
But the break is over and the ramp-up of production is gaining ground. Tesla’s combined Model S and X deliveries topped 9,000 in the third quarter, up nearly 400% sequentially.
Deliveries could increase further
Of course, investors should note that deliveries of the Model S and Model X are still down from where they were before, implying that Tesla still has some way to go before its improved production lines for both. vehicles are fully utilized. Total deliveries of the two vehicles, for example, are down 39% year over year.
Given the positive demand trajectory for Tesla vehicles overall, and given the fact that Model S and X vehicle deliveries were significantly higher before the production hiatus, it is likely that quarterly deliveries of high-end vehicles rose sharply again in the fourth quarter.
Deliveries of the updated versions of the vehicles could even reach levels well beyond what they were in the quarters leading up to the production hiatus. There was a point in 2017 and 2018 when total quarterly shipments of Model S and X models frequently exceeded 25,000. Additionally, Tesla said in its letter to shareholders for the second quarter that it had installed equipment capacity. production at its California plant for the construction of 100,000 Model S and X vehicles per year.
Of course, investors should not count on cumulative quarterly deliveries of the two vehicles once again exceeding 20,000. We will need more comments from management on the development of demand for both vehicles before we can make any changes. such bullish forecasts. But it is certainly likely. After all, Tesla said its orders for all of its combination vehicle models reached record levels in the second quarter. We have yet to hear about third quarter demand, but we will likely do so when the company reports earnings for the quarter later this month.
If Model S and X shipments increase significantly, the impact on Tesla’s business could be significant. As more expensive models, they have historically had higher profit margins than the Models 3 and Y, making inordinate contributions to Tesla’s per-car bottom line.
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