Tesla's Q2 Deliveries: Beating Expectations Despite Dip - An In-Depth Analysis

Tesla's Q2 Deliveries Exceed Expectations Despite Year-Over-Year Decline

Data released on Wednesday showed that Tesla (TSLA.O) delivered 384,122 vehicles in the second quarter, a 13.5% decrease compared to the 444,000 delivered in the second quarter of 2024. However, this was slightly better than Wall Street's consensus expectations of around 386,000. This marks the largest quarterly drop in the company's history, though still better than the 337,000 delivered in the first quarter of 2025. Prior to the report, the latest analyst forecasts ranged around 355,000. However, Tesla's stock rose 5% on Wednesday to $315.65. Wedbush analyst Dan Ives commented, "For Tesla, the 'fireworks show' came a bit early," and gave Tesla a "buy" rating with a target price of $500. William Blair analyst Jed Dorsheimer echoed this sentiment, also giving the stock a "buy" rating, but without specifying a target price.

External Factors Impacting Tesla's Sales

Most investors were somewhat prepared for this performance due to weak mid-quarter sales data. According to weekly data tracked by Citi analyst Jeff Chung, Tesla's sales in Europe were down about 37% year-over-year in April and May. In China, quarterly sales were down over 10% year-over-year. Furthermore, Musk's stance in the Trump administration has alienated some core left-leaning buyers with environmental concerns. Tesla management also acknowledged in the April first-quarter earnings call that the brand faces challenges and that trade tensions make some Asian consumers avoid buying American products.

Looking Ahead

Despite this, the second-quarter delivery data was a significant relief. At the beginning of the year, expectations for the second quarter of 2025 were as high as around 500,000 vehicles, but with the first quarter down 13% and failing to meet Wall Street expectations, expectations were quickly lowered. Until the second quarter, this year-over-year drop was the worst performance since the launch of the Model S in 2012. Prior to Wednesday, Tesla's stock had fallen for six consecutive trading days, a cumulative decline of nearly 14%. However, Tesla's short-term stock movements are notoriously difficult to predict: after disappointing delivery data in the first quarter, the stock rose 5.3% after Musk stated that he would reduce his time in Washington and devote more time to Tesla.

The Importance of Elon Musk's Role

Investors view Musk staying "in the driver's seat" as a key factor. Ives believes that "as long as he continues to lead, we believe Tesla will embark on an accelerated growth path in the coming years, and we expect deliveries to increase in the second half of 2025 after the Model Y refresh cycle." Tesla recently updated its best-selling Model Y, and sales often slow down as buyers wait for the new model.

Focus on Earnings and Future Growth

With the delivery data settled, second-quarter earnings will be announced on July 23. According to FactSet, Wall Street currently expects earnings per share of 44 cents, down from 52 cents in the second quarter of 2024. At the beginning of the year, analysts' estimates for EPS for this quarter were around 85 cents. The solid delivery performance suggests that the adjustment to EPS will likely not be too significant. Tesla produced 410,244 vehicles this quarter, leading to an increase in inventory, which will affect cash flow and may affect pricing in the coming months. The company also delivered 9.6 GWh of energy storage products this quarter, up from 9.4 GWh in the second quarter of 2024, but down from 10.4 GWh in the first quarter. After automobiles, stationary energy storage is Tesla's second-largest business. Investors are also looking forward to updates on upcoming new models. Tesla Vice President of Vehicle Engineering Lars Moravy stated in the first-quarter earnings call: "We still plan to launch new models this year." However, details about the new models have been scarce, and investors hope that it will inject new momentum into sales growth.