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In the previous post on Tesla’s productions & deliveries (2018 Q4), a not-so-good Q1 is somehow foreseeable, when Model 3 has little QoQ growth from Q3 to Q4 despite the holiday season and a fade in US tax credit at year-end.

Tesla has more concerning issues.

Depressed Margins

The mass production of Model 3 in 2018 H2 helped to improve the automotive sales gross margin in Q3 and Q4.

However, due to the price reduction in 2019 Q1, less absorption of fixed cost and more international deliveries, the automotive sales gross margin went back to the 18-19% region in 2019 Q1.

While production in China is expected to reach a rate of 2,000 vehicles a week by the end of 2019 (according to Elon Musk), the gross margin of automotive sales will remain <20% for 2019 I think (with model 3 basic)

Tesla said the capital spend (CapEx) per unit of capacity for Shanghai factory is expected to be less than half of that of the Model 3 line in Fremont. Not 50% COGS though.

Model S & X Halved

Number of produced is at ~56% of 2018 Q4.

Number of delivered is at ~44% of 2018 Q4.

Though, Tesla reaffirmed its prior guidance of 360,000 to 400,000 vehicle deliveries in 2019, thanks to the confidence in Model 3.

China Sales

Although China (China and Europe mainly) sales in 2018 decreased compared to 2017, Tesla’s March performance in China is exceptional, with 9,273 in total (Model 3: 7515; Model X: 1490; Model S: 268)

Many attributed the jump in sales to the “one time” price adjustment in China, including a ¥341 drop in the most expansive Model X (P100D), which then corrected by a general 3% increase.

But the ongoing sales numbers is still in question.

China’s EV market has been increasingly competitive. And in April, a video of a parked Model S emitting smoke and bursting into flames seconds later was spreading across China’s Weibo, which doesn’t do any help.