Tesla Motors improved its production and customer delivery performance in the just completed Q2-2019 quarter. While the operational performance has set a new record, from our lens, its too early to declare any form of goal achievement. Tesla Motors

According to the company’s press release, a total of 87,048 vehicles were produced in Q2, of which, 72,531 vehicles were completed Model 3 sedans. This was a notable improvement from the Q1’s total of 77,100 total vehicles. However, Model 3 production has yet to meet the milestone of 5000 vehicles produced each week. Counting prior vehicles-in-transit after the close of Q1, Tesla delivered and gained revenue recognition for a total of 95,200 vehicles. According to reporting by The Wall Street Journal, analyst consensus hovered at 90,700 deliveries.

A rally cry from CEO Elon Musk during the final week likely helped in achieving the record customer delivery performance. With one-half of the year now in the books, Tesla has achieved 44 percent of the low point, or 39 percent of the high point target for delivering between 360,000 to 400,000 vehicles in 2019. Thus, more process improvement remains for the remainder of the year. The auto maker also disclosed that orders generated during Q2 exceeded deliveries, thus, customer order backlog is increasing.

The company’s release indicates significant progress made in Q2 streamlining global logistics and delivery operations. Customer vehicles in-transit at the end of Q2 were reported as over 7400. That compares to the 10,600 vehicles reported in-transit at the end of Q1, thus some process improvements have occurred.

Supply Chain Matters was disappointed to note Tesla’s declaration to not disclose the vehicles-in-transit metric going forward. The electric auto maker claims that since it has resolved its order-to-VIN matching process, there is no longer a need to disclose in-transit. We find that explanation, to be blunt, rather lame, a sign of management declaring pre-mature victory. If the process is indeed improving, then provide customers and shareholders continued visibility to that improvement.

The next important milestone for Tesla will be reporting of Q2’s financial performance and equity analysts are positioning the market for an anticipated quarterly loss in profitability.


Added Perspectives

As has been noted in our ongoing Tesla Motors focused commentary, this auto maker needs to move away from the culture of ‘we know best’ to that of what other successful global automakers have learned in manufacturing, supply chain and quality focused process discipline.The upcoming quarter also requires a shift in production models as well as manufacturing tooling, as new models are being prepared for production and delivery.

The 2019 goal for delivering 400,000 vehicles remains a challenge and high hurdle, and as other analysts have observed, there is no sense of normalcy, rather ongoing significant hurdles.  Having limited financial flexibility has not helped, as was the unfortunate need to reduce overall headcount. Meeting the milestone for opening of the new production facility near Shanghai later this year is a further necessity.

Electric vehicle Industry competitors are indeed making their market presence and the window of competitive opportunity is narrowing for Tesla.

Bob Ferrari

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