Could Tesla Crush Its Own Guidance?



Fremont factory. Source: Tesla Motors.

A new report of impressive Model S sales in Norway in the month of September may be the first indication that Tesla Motors' could potentially post better than expected sales in its third quarter. If the company is blowing away its sales expectations for the region, could it be beating its guidance for total vehicle sales, too?

Will the surprise factor jump this quarter?
There's good reason to be surprised to hear that Tesla is reporting better than expected sales in any region. Over the last three quarters Tesla has proven to provide very accurate guidance.




Surprise Factor

Q1 2013

4500 vehicles

4900 vehicles


Q2 2013

5,000 vehicles

5150 vehicles


Q3 2013

Slightly over 5,000



Based on first- and second-quarter guidance versus actual results, Tesla seems to avoid lowballing its vehicle sales estimates. Based on historical results, therefore, its realistic to expect Tesla's actual third-quarter sales to be close to its projection for slightly over 5,000 vehicles. Even more, there's little sign that Tesla's production rate will improve in the fourth quarter, either; its forecast for total 2013 vehicle sales has only been boosted by 1,000 vehicles over the past three quarters, from 20,000 to 21,000.

But if Tesla doesn't lowball estimates and management provides fairly accurate sales estimates, what can we make of this news from Norway?

Model S sales soar in Norway
Tesla's model S outsold every model in the country last month, according toThe Wall Street Journal. The Model S accounted for 5.1% of the country's total sales.

It's not surprising that the Model S is doing well in Norway. The country's affluent population and its generous incentives for electric-vehicle buyers lay the foundation for a Tesla-friendly market. Even more, Tesla has recently aggressively expanded its Superchargers in the country. Demand in Norway, therefore, is expected.

But what's surprising about the report is just how well Tesla is doing in Norway. In the company's second-quarter letter to shareholders Tesla said that it expects "to deliver almost 800 vehicles this year based on current orders." But according to this Norwegian car sales data Tesla sold 616 Model S sedans in September alone. While demand in the country is obviously exceeding Tesla's expectations, what's really interesting is that Tesla has been able to actually deliver this many cars. It's especially surprising given the company's conservative guidance for basically the same vehicle sales in Q3 as Q2.

The bigger picture
Investing on quarter-by-quarter speculation isn't a smart way to invest. But there could be a deeper story at work here. During the second-quarter earnings call, CEO Elon Musk elaborated on the company's production limitations saying that it expects it to take about six months to work out its bottlenecks that are limiting production. But with Tesla blowing away its own estimates for Norway sales, could the company have worked out some of these key bottlenecks earlier than expected?

For a production-limited company, finding ways to solve bottlenecks is a key priority. Though Norway's sales do suggest some problems may have already been solved, it will be best to wait until we hear an update on the company's weekly production capacity before we officially conclude that Tesla is solving its bottlenecks.

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