Supply Chain Matters provides highlights and added perspectives to EV automaker Tesla’s reported production and customer delivery performance in Q2-2023.

 

Q2 Production Output and Vehicle Deliveries

On Sunday of this week Tesla reported to company investors that the EV automaker had delivered 466,140 vehicles in Q2, establishing a new record for quarterly sales. Most of these deliveries, upwards of 96 percent, were for the Tesla Model 3 and Model Y vehicles. The Q2 delivery performance represented a 10.2 percent increase over the 422,875 vehicle delivery performance in Q1.

On the production side, the company reported that 479,700 vehicles were produced globally in the latest quarter. That number represents an 8.8 percent increase over the Q1’s reported production out of 440,892 vehicles.

Commenting on the latest quarterly operational performance, The Wall Street Journal reported that these “better-than-expected results give company founder and CEO Elon Musk, new ammunition in his argument that demand remains strong for his aging lineup as he gambles that pursuing growth at the expense of profitability will have long-term benefits for the electric car maker.”

The report cautions that the EV automaker’s vehicle demand patterns have been softening of-late and that this automaker has added risk in building too much finished inventory. That added risk is in the direct-to-consumer distribution network, where there are no local dealers or regional wholesalers to soften the burden of new car inventory levels.

Company investors are now keen in anticipating Telsa’s report of overall Q2 financial performance on July 19, especially on revenues, margins and profitability change dimensions.

The China EV Segment

Supply Chain Matters would add a further qualifier to the above, given the added industry vehicle delivery and production developments that occurred specifically in China during the latest quarter. This particular market is considered to be of particular importance in terms of volume demand.

A published report from broadcast network CNN specifically focused on vehicle deliveries from Tesla’ s Shanghai complex, cited data from the China Passenger Car Association which indicated that production more than doubled in the second quarter, accounting for over half of its record global sales. Data from the trade association reportedly indicated that total wholesale vehicle deliveries in Q2, which included both domestic and export deliveries, amounted to 247,217 vehicles. If one were to equate this Shanghai output to Tesla’s reporting of total global production, then the Shanghai output amounts to upwards of one-half of global production (51 percent). The CNN report indicated that based on the China trade agency data, the Shanghai facility accounted for 53 percent of total sales in the recent quarter.

More interesting data reflected in the CNN report was that China based EV rival BYD sold more than 700,000 new energy vehicles in Q2, of which, 352,163 vehicles reportedly were battery powered. This established a new quarterly record, and provided recognition that BYD is currently the best selling EV brand in China, followed by Tesla.

 

Added Perspectives

As our prior Supply Chain Matters commentaries related to Tesla have indicated, production, product development and supply chain strategy must be aligned with a company’s overall market growth and business strategy objectives. The goal for seizing market share by leveraging vehicle price reductions coupled with increased production output is one the auto industry is fully aware. In the specific case of Tesla, it equates to holding-off likely competitors while buying time to develop, introduce and ramp-up new model lines.

Specifically for the China market, Tesla is vying with savvy competitors that are responding with both added innovation, features as well as price competitiveness.

Globally, the field of EV models and added innovation in the market will grow very crowded over the coming two years. While Tesla vehicles continue to differentiate in the current global market, the introduction of highly recognized branded auto makers adds to the competitive dimension. With that comes the need for increased supply network and production efficiencies especially where market demand levels are highest, that being a consumer’s first EV purchase, aided by government green energy incentives.

Bob Ferrari

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