(Bloomberg) -- It’s been another rough quarter for the rollout of Tesla Inc.’s Model 3. The factory was shut down at least twice for extensive upgrades, a new production line was hastily erected in a tent in the parking lot, and Chief Executive Officer Elon Musk moved from sleeping on the couch to sleeping under the desk. He was even seen personally torquing bolts on an assembly line, alongside a summer intern.
Now the mad scramble to meet a self-imposed production deadline—a rate of 5,000 cars per week by the end of June—is coming to an end. The quarter concludes Saturday, and Tesla is expected to report its production figures for the last three months before the July 4 holiday. Tesla has repeatedly fallen short of its own manufacturing targets. Now investors will find out exactly how many cars Tesla made, sold and stockpiled—and what sort of weekly rate they were finally able to achieve.
Here’s our rundown of what to expect.
Seeing a Shortfall: Bloomberg’s Model 3 Tracker
Back in February, Bloomberg introduced an experimental tool to track the Model 3 rollout. The tracker uses vehicle identification numbers (VINs) to estimate production in real time. The model projects that Tesla finished the quarter making 27,957 Model 3s—or 4,533 in the last week, shy of Musk’s goal. Since production of the Model 3 began in July 2017, the Bloomberg tracker estimates that 40,409 of the sedans have been made.
Musk himself has suggested that this estimate is too low. An analyst report by Goldman Sachs Group Inc., which projected quarterly production that’s just 43 cars more than the Bloomberg estimate, prompted the CEO to send an email to his employees. “They are in for a rude awakening,” Musk wrote.
The Bloomberg model is, by design, slow to reflect sudden shifts in production and could underestimate Tesla’s last-minute manufacturing push that spilled into a gigantic tent outside the factory in Fremont, California. Back in the first quarter, the Bloomberg Model 3 Tracker underestimated the actual production total by less than 5 percent—coming closer than the Wall Street consensus. The tool doesn’t estimate total deliveries, which can vary based on the number of cars in transit at the end of the quarter.
Wall Street Doesn’t Think Tesla Made It
Wall Street has also been placing its bets on Tesla’s quarterly figures. The average of eight analysts surveyed by Bloomberg projects second-quarter Model 3 deliveries of 26,121 cars. Three analysts also gave estimates for production, which averaged 30,167.
The number most people are watching is Tesla’s weekly production rate, a squishy figure that Musk has set up as his quarterly benchmark. Tesla initially targeted a rate of 5,000 per week by the end of 2017, but the company has since moved that target back twice. Only one firm stuck their neck out with an estimate of weekly production: Evercore ISI predicts that Tesla will hit 4,600 during the final week.
Total shipments for Models S and X are expected to be around 22,622 units, according to an average of six estimates.
One thing that makes this quarter particularly hard to assess is the approaching expiration of the U.S. tax credit for electric vehicles. Tesla may be suppressing U.S. sales as the quarter ends as way to extend its federal electric-vehicle tax credit of $7,500 per car. The subsidy begins to phase out one full quarter after the quarter in which Tesla sells its 200,000th electric car in the U.S. By hitting that milestone after July 1, rather than a day earlier, Tesla would gain an additional three months of tax credits that could be worth more than $400 million to Tesla customers, according to Bloomberg estimates.
In June, Tesla filled Model 3 orders to reservation holders in Canada ahead of deliveries to some U.S. customers. There are other actions Tesla may be taking, including accelerating its overseas deliveries for the Model S and Model X and stockpiling cars at holding facilities, all of which could push quarterly revenue into the third quarter, which is when Musk vows that Tesla will finally become profitable.
Tesla’s stock has been on a tear in the second quarter, boosted by apparent progress on Model 3 production. The stock has climbed 31 percent to close at $349.93 on Thursday. Tesla’s market value reached $59.4 billion—more than long-established rivals General Motors Co. and Ford Motor Co. On Friday though, Tesla fell $6.98—or 2 percent—to $342.95.
Here’s a roundup of what analysts’ are saying ahead of the key delivery figures:
Goldman Sachs, David Tamberrino:
(Sell, price target $195)
- “We believe that Model 3 deliveries are tracking below consensus.”
- “Investor conversations on the stock have moved past the 5,000/week run-rate production target (as we believe most investors are giving the company credit for achieving this level entering third quarter) toward vehicle profit margins and conversion of Model 3 reservations to higher priced vehicles.”
- Forecasts Tesla achieving about 22,000 Model 3 deliveries to customers in the quarter, up from Goldman’s previous 19,000 estimate, but well below consensus. His forecast for production is 28,000, in line with the Bloomberg Tracker.
- Believes Tesla is tracking below its 2018 Model S/X guidance of about 100,000 units, based on the quarter-to-date May cadence.
Barclays, Brian Johnson
(Underweight, price target $210)
- “While we appreciate the steps taken to raise capacity, we believe the admission that it needed a second general assembly line to reach 5,000/week is another indicator of the challenges in ramping production.”
- “On the path to reaching 10,000 model 3/week, one key item to be addressed is paint shop capacity. The paint shop will need to have capacity added to handle 10,000 Model 3/week in addition to 2,000 S/X per week.”
Bernstein, Toni Sacconaghi
(Market-perform, price target $265)
- Says Tesla’s Automotive segment’s gross margins may be overstated, noting a steep plunge in the gross margins of the Services and Other segment.
- Expects second-quarter Model 3 deliveries of 26,000.
Evercore ISI, Arndt Ellinghorst & George Galliers
(In-line, price target )
- Expects Tesla to deliver “21,800 Model S/X during the quarter and 30,700 Model 3, with Model 3 production at a run-rate of 4,600 during the final week versus guidance of 5,000.'”
- Notes comments by Panasonic executive that a pick-up in Model 3 production has resulted in occasional battery shortages.
Guggenheim, Robert Cihra
(Buy, price target $430)
- Still sees Tesla flipping from “losses to profits in second half of 2018” and the prospect of a profitable Tesla setting up a “meaningfully more positive stock narrative.”
- “Tesla producing as many as 35,000 Model 3s and shipping 29,000, up from just over 8,000 in the first quarter and 2,000 in the fourth quarter.”
- “While 6 months later than projected, we continue to estimate that 5,000/week bogey then setting up Tesla’s overall model to flip from sizable cash burn in first half of 2018 to profitability in second half, as Model 3 volumes drive big revenue, margin and free cash flow leverage off the big fixed-cost structure Tesla has been building.”
Consumer Edge, James Albertine
(Overweight, price target $385)
- “Production of the Model 3 is still the primary driver of upside to expectations and shares in 2018.”
- “We visited the Gigafactory in May, which is when we learned about Tesla’s push to 5,000 units per week of Model 3 production by second quarter-end, a goal we believe many investors did not believe management could achieve prior to our visit.”
- Estimates second-quarter Model 3 deliveries to stand at 25,000 units.
Baird, Ben Kallo
(Outperform, price target $411)
- “We expect the focus will be on exit rate Model 3 production and total Model 3 production in June, in that order, and believe the stock could trade up if Tesla approaches its 5,000/week production target.”
- “We think TSLA may deliver about 25,000 vehicles.”
- “Consensus estimates for second-quarter deliveries may be too high, particularly given our belief there could be a larger-than-normal delta between production and deliveries due to the ramp during the quarter.”
©2018 Bloomberg L.P.