• by Thom Forbes  @tforbes, April 4, 2019

Tesla’s sales plunged 31% from January through March from the last quarter of 2018 -- but it offered up several plausible reasons why, and analysts had mixed feelings about what it all means. The high-end Models X and S were the biggest losers.

“The Palo Alto, Calif., company churned out 77,100 vehicles … well behind the pace it must sustain to fulfill CEO Elon Musk’s pledge to manufacture 500,000 cars annually. The company only delivered 63,000 vehicles in the quarter,” according to the Associated Press. “The lower-than-expected delivery numbers and ‘pricing adjustments’ will take a bite out of Tesla’s first-quarter net income, it said. But it said it ended the quarter with sufficient cash on hand.”

“The news was released late in the day in California, long after the U.S. financial markets had closed. Its shares dropped roughly 7% in pre-market trading on Thursday. The group’s shares had already fallen 15% from a January high on worries that the company would not be able to sustain the financial improvements seen in the second half of last year,” Richard Waters reports for Financial Times.

Indeed, “the first-quarter deliveries fell short of what Wall Street had expected. Analysts polled by FactSet before Wednesday’s news expected Tesla to deliver 76,000 vehicles during the first quarter, including 54,600 Model 3s,” while it actually shipped 50,900, Samantha Masunaga and Russ Mitchell write for the Los Angeles Times. 

“The first-quarter numbers were partly affected by the decreasing federal tax credits available for electric-car purchases, which pulled deliveries into the fourth quarter, Tesla said. But the decline also came despite the company cutting prices and offering incentives on some models,” they add.

“The numbers were ‘shockingly bad,’" Mark Spiegel of hedge fund Stanphyl Capital Management, which holds a significant short position in Tesla, tells them. 

But Wedbush analyst Dan Ives was not as harsh in his judgement, as CNBC’s Robert Ferris points out. “Overall, the Street was expecting an apocalyptic quarter and Model 3 deliveries were better than feared by many with 50k Model 3 vehicles the ‘line in the sand’ although the overall number was clearly rocky and represents an ‘air pocket’ quarter in our opinion.”

“Tesla cited challenges it encountered with deliveries overseas,” Graham Rapier writes for the Insider.

“Due to a massive increase in deliveries in Europe and China, which at times exceeded 5x that of prior peak delivery levels, and many challenges encountered for the first time, we had only delivered half of the entire quarter’s numbers by March 21, ten days before end of quarter. This caused a large number of vehicle deliveries to shift to the second quarter,” Tesla said in a news release.

“Like many other previous quarters, this deadline was also met with an all-hands-on-deck rush to meet internal targets by Tesla. Emails from CEO Elon Musk, which Business Insider obtained in March, to company employees highlighted how important this quarterly deadline was for the company,” Rapier adds.

“Joseph Spak, an analyst for RBC Capital Markets, said in a note that Tesla’s explanation for the declines blamed on Europe and China ‘speaks to the lack of planning and foresight that remains at the company,’” Tim Higgins writes for the Wall Street Journal.

“David Whiston, an analyst at Morningstar Research Services, said the Model 3 ‘should bounce back in Q2 if the transition challenges to delivering in Europe and China are behind them,’” Higgins adds.

“Next month, Tesla hopes to begin volume deliveries of a $35,000 version of the Model 3, the car that many of the company’s fans have been waiting for. Analysts are uncertain whether Tesla can make money selling the Model 3 at that price, however,” Neal E. Boudette reminds us in the New York Times.

Musk has largely reversed a late February decision to close most of its stores, saying it would raise prices about 3% on most of its vehicles -- the cheaper Model 3 notably excluded -- instead, Boudette reports.

In other Tesla news, the automaker “is taking a step closer to a true self-driving car future with a model that entirely lets your car decide when to change lanes,” Sean Hollister writes for The Verge.

“Previously, if you punch in your destination, keep your hands on the steering wheel and feet near the pedals, your Tesla’s optional ‘Navigate on Autopilot’ mode would do its best to keep you on the freeway, proactively asking for confirmation before it makes any lane changes. But a new software update changes that. If the driver says they don’t require the car to confirm a lane change, the car will … just change lanes,” Hollister explains.

If Tesla could figure out a way to put things like production, sales, investor confidence and CEO Elon Musk’s behavior on autopilot, it would be all set.