Tesla has just delivered its “first positive surprise of the year,” according to Morgan Stanley, surpassing delivery expectations by approximately 6,000 units in Q2. This is a monumental stride for the EV giant, which has been grappling with growth challenges in 2024. On Tuesday, Tesla reported quarterly deliveries of 443,956, a remarkable feat considering Wall Street’s consensus was pegged at 438,019.
This delivery beat marks a vital turnaround for Tesla, which has struggled to deliver consistently positive news in the first half of 2024. Labelled as a “first positive surprise of the year” by Morgan Stanley analyst Adam Jonas, these numbers hint at a trend that could redefine Tesla's trajectory for the coming quarters.
Delivery Beat: A Step in the Right Direction
While Tesla exceeded delivery expectations, there's much ground still to cover before even the most optimistic investors can breathe easy. Although there's been a quarter-over-quarter increase, the Q2 numbers still fall short of what Tesla reported in the same quarter last year. To maintain a flat annual growth rate and avoid reporting a loss, Tesla will need to ramp up deliveries significantly in the second half of the year, aiming for roughly a 6% increase.
Inventory Reduction: Demand Outstrips Supply
In addition to impressive deliveries, Tesla managed to deliver 33,000 more units than it produced in the quarter, signaling a reduction in inventory. This essentially means demand for Tesla vehicles is robust, with consumers eager to purchase available inventory. Adam Jonas elaborated, noting that this inventory reduction significantly offsets the increase seen in Q1, resulting in a notable working capital inflow.
“Tesla delivered 33k units more than it produced in 2Q, driving a 7-day reduction in days’ supply of inventory (on a full calendar day basis) in the quarter. The 2Q inventory reduction substantially (but not fully) offsets the increase in inventory seen in 1Q. At an ATP of $45k/unit this, by itself, drives a $1.5bn working capital inflow during the quarter — higher than the $600mm tailwind we had expected. Our 2Q forecast for $0.9bn FCF burn looks incrementally more conservative following this print.”
Energy Storage Deployments: The Showstopper
Perhaps the most surprising information from Tesla's Q2 report had nothing to do with vehicles. The company reported its highest-ever deployment of energy storage products, a staggering 9.4 GWh, marking a 132% increase from the previous quarter. Previously, its highest was 4.053 GWh in Q1 2024.
Labeling this news as a “show stealer,” Jonas highlighted that the actual deployment was nearly double what Morgan Stanley had predicted for the calendar year. This could well be a key factor for investors to watch in the coming months, especially with the burgeoning demand spurred by advancements in Artificial Intelligence and the subsequent increase in energy needs.
“As Gen AI acceleration spurs a multigenerational increase in energy demand, electricity generation, and data center investment, we believe investors will begin to pay more attention to Tesla Energy, which we value at $36 per Tesla share ($130bn) as the business uniquely positioned to benefit from investment in the U.S. electric grid accelerated by the AI boom.”
Recapturing the Tesla Mojo
Investor sentiment seems to be shifting as well. Just two weeks ago, many were bracing for a potential rejection of Elon Musk’s 2018 compensation package. Today, the questions pivot towards the positive catalysts for Q2 and what lies beyond. Investors are now pondering the quintessential question:
“Is this the same Tesla from early June?”
In conclusion, while Tesla has crossed a significant milestone in Q2 with surprising delivery figures and record-breaking energy storage deployments, it still faces crucial hurdles. The coming months will be vital for maintaining this momentum and meeting the high expectations set by its early success in Q2.