Tesla surprises with forecasts for sales and deliveries, shares jump

By Akash Sriram, Abhirup Roy

(Reuters) -Tesla Chief Executive Elon Musk said he expects vehicle sales to grow 20% to 30% next year, aided by improvements in autonomous technology and the launch of more affordable models, sending the company's shares up 12% in post-market trading on Wednesday.

The company earlier in the day forecast "slight growth" in auto deliveries this year, surpassing the 1.8 million vehicles it delivered in 2023. It also handily beat third-quarter profit expectations, though revenue was a slight miss.

Its quarterly report reassured Wall Street that the company was improving at its core business of making and selling electric vehicles, reducing concerns about when it could produce new models including a robotaxi.

The 12% surge in stock during the quarterly conference call after the bell added about $80 billion in stock market value. The stock dropped 2% during Wednesday's trading session.

Tesla said it remained focused on expanding its vehicle lineup, cutting costs and making critical investments in AI projects and production capacity, despite uncertain demand and rivals pulling back on EV investments.

"Preparations remain underway for our offering of new vehicles – including more affordable models – which we will begin launching in the first half of 2025," it said.

Musk has been focused on transforming Tesla from a pure-play EV maker to a leading force in autonomous driving and artificial intelligence. But the company's robotaxi event earlier this month left investors desiring more details on how the company plans to do so.

Investors slammed shares the next day, punishing Tesla for the conspicuous absence of a concrete business plan. 

On Wednesday, Musk said adoption of the company's supervised autopilot software, known as Full Self-Driving, increased substantially after the robotaxi event. Tesla this month again offered FSD free for a month to its old customers, the secodn time this year.

"The improving numbers across the board signal the company may have finally found a nice sweet spot for the pricing-versus-production-costs equation, which has been the main issue for stock performance since last year," said Thomas Monteiro, senior analyst at Investing.com. "The report also diminishes the urgency for a cheaper model."

The EV giant said that the labor and material costs of making vehicles, known as the cost of goods sold per vehicle, dropped to its lowest level ever, about $35,100. Adjusted profit of 72 cents per share in the third quarter beat an average estimate of 58 cents.

Prices of raw materials used to make EV batteries have been falling and Tesla has said its costs will decline as a result this year, with the effect diminishing over time.

Tesla's third-quarter profit margin from vehicle sales, excluding regulatory credits, grew to 17.05% from 14.6% in the prior three-month period, according to Reuters calculations.

Wall Street had expected the figure to be 14.9%, according to 24 analysts polled by Visible Alpha.

INCENTIVES

Tesla has already delivered 1.29 million vehicles in the first nine months of this year. It needs to hand over another 514,925 vehicles to beat last year's record.

The company said earlier this month that its September-quarter deliveries grew by more than 6% on a year-over-year basis, marking the first quarter of growth after a decline in the January-June period.

On Wednesday, it said it recognized its second-highest quarter of regulatory credit revenue. This metric was up 33% year-over-year to $739 million, but down from $890 million in the second quarter.

The company slashed prices last year, leading to a sharp decline in profit margins. This spring, it shifted its strategy to offering cheaper financing options and discounts that analysts have said could slow its margin bleed over the coming quarters. 

"The fear going into results was that the huge incentives effort to push volumes into the tough EV market would materially dent margins – that doesn’t look the be the case," said Matt Britzman, a senior equity analyst at Hargreaves Lansdown who also personally owns Tesla shares.

Revenue for the July-September quarter was $25.18 billion, compared with estimates of $25.37 billion, according to data compiled by LSEG. It reported sales of $23.35 billion in the corresponding quarter of 2023.

(Reporting by Akash Sriram in Bengaluru and Abhirup Roy in San Francisco; Additional reporting by Noel Randewich in Oakland, CaliforniaWriting by Sayantani GhoshEditing by Sriraj Kalluvila, Peter Henderson and Matthew Lewis)