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Demand for Tesla Cars Is Rapidly Accelerating

Tesla delivered 180,570 vehicles (up 61% y/y) and produced 179,757 vehicles (up 71%) in the most recent December quarter. These numbers were ahead of analyst consensus at 173k deliveries and in line with recently raised investor expectations. The company fell 450 vehicles short of its 2020 delivery target of 500k. For industry comparison reasons, we will look to other automakers’ delivery reports in the coming days. 

  • Tesla delivery growth is accelerating. December quarter deliveries were 61% y/y, compared to 44% in September 2020 and 23% in December 2019.

  • Model 3/Y accounted for 89% of deliveries, in line with September 2020 results.

  • The good news is Tesla has the formula consumers want. 

  • The bad news is to keep up with this demand, the company needs to quickly build new factories in Austin, Texas, and Brandenburg, Germany. While they made it look easy in Shanghai, ramping production is difficult and will be one of the most important Tesla topics in 2021, along with the status of FSD.

  • The bottom line: we expect Tesla’s y/y delivery growth rates in 2021 will likely be closer to 40%, which means the company will still grow deliveries 4-5x faster than most auto companies. Our 40% delivery growth expectation is below the Street’s 57% target (784.8k vehicles). While the production road may be bumpy, adding risk to Tesla’s ability to make cars fast enough in 2021 to meet analyst estimates, it does not change our view that Tesla is best-positioned to have leading EV global market share over the next decade.

Traditional auto’s catch 22

We believe traditional carmakers have two options going forward:

  • Option 1: Release a car with features and range at parity with a Tesla, and sell it at cost. This car will be priced 10-25% higher than a comparable Tesla, thereby softening demand and leading to further market share loss.
  • Option 2: Subsidize vehicles in order to gain market share from Tesla. With a limited margin cushion, this will increase losses. The more they sell, the more money they lose.

Taking it to the logical end, we believe car companies that have been around for 50+ years will eventually (10 years from now) be forced to restructure or go out of business.


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