Let me try to answer questions people might have to make this easier to read:
Is there a problem in Q4?
Yes, the problem is that on 19 Oct Tesla said they expect just under 50% delivery growth this year. You can
listen here. However, the current trend suggests 39-41% if Tesla doesn't make move in China.
Why wouldn't Tesla just export more if we are indeed trending towards 39-41% delivery growth?
Tesla didn't know the orders in China would be much less than needed after the 24 Oct price drop. They were expecting more orders. Reports from China suggest strong orders for the first week after the 24 Oct price cut but then apparently orders slowed down in the second week. That means they would have realized the issue around 6 Nov. By that time, it's already too late to book more ships for Q4 deliveries because it takes 40 days from Giga Shanghai to a buyer in Europe which means ships need to depart by 21 Nov and you would need to book them a month in advance. It is unfortunate that they waited until 24 Oct to drop the prices. Exports were 54,504 in October according to CPCA. The shipping data so far in November suggests 35-40K in Nov. That's not great.
Can't they just export in December?
Yes, they can but that doesn't help with Q4 deliveries because December exports will be delivered in January because of the long transit time. In other words, it doesn't help with the 39-41% delivery growth issue.
Tesla sold 121K cars in China in Q3 2022 before the price drop. Why wouldn't they sell 130-150K units in Q4 after the 24 Oct price drop?
Yes, they delivered 121K cars in Q3 but most of them were ordered before Q3. We know that because of the long wait times. For example, the wait time for Model 3 Standard Range was 20 weeks entering Q3 but by mid-Sep, it dropped to 1 week. I estimate that Tesla received only 60K orders during Q3. Therefore you need to think about how many orders they might get in Q4 after the 7% (on average) price drop on 24 Oct vs 60K orders in Q3. I think 90K is a good estimate considering that there were also some people waiting on the sidelines.
What data suggests they don't have enough orders?
I'm looking at the inventory build-up in China based on CPCA (China Passenger Car Association) data. I'm calculating inventory by subtracting deliveries and exports from production. Based on this data, inventory was 35,418 units in China at the end of October. Some people said how can it be 35K just in China when global inventory was 37K at the end of Sep. Let me explain, October CPCA numbers were as follows:
87,706 production
17,200 deliveries
54,504 exports
Therefore the change in inventory in October was = 87,706 -17,200 -54,504 = 16,002 units. In other words, inventory in China increased by 16,002 in October. It was 19,416 at the end of Sep. That's why it was so high at the end of October. The highest-ever inventory before October was 20,823 at the end of July. As you can see, the end-of-October inventory was super high compared to any other month.
Some people claimed that 35,418 inventory in China at the end of October was just Tesla preparing cars for exports. That's not true because the first ship in November to Europe (Glovis Safety) departed on Nov 8. The second one (Tokyo Car) departed on Nov 10. Giga Shanghai produces 3,000 cars/day. Each ship carries 3,900 units. It takes less than 2 days of production to fill up a ship.
The numbers suggest either none or a small portion of the 35,418 cars were for exports. If none were for exports, there would be still enough time to produce cars before the first ship started loading on Nov 7.
In addition to inventory, I'm looking at the weekly car registration numbers in China. There is a
website here that publishes them. The numbers are not great. It should have been much higher because they had lots of cars in inventory. To me, this shows that the number of orders they received after the 24 Oct price cut was not enough.
Another clue that suggests the same thing is the insurance promotion on 8 Nov. See the
news article here. Tesla is offering 8,000 yuan ($1,100) for deliveries by 30 Nov. If they had enough orders after the 24 Oct price drop, they wouldn't have refreshed the insurance promotion on 8 Nov.
Based on my calculation, inventory in China will be too much to handle by the end of Nov. Therefore I expect Tesla to make a move to generate more orders. We will have a better idea about demand in China after more weekly insurance registration data.
I recommend reading
this post by an automotive blogger in China. He thinks Tesla doesn't have enough orders and some buyers who ordered the car don't want to take delivery. He blames the economy.
Why is your production estimate always so low?
It's not. In 3 out of the last 6 quarters including the last 2 quarters, my final estimate was higher than the actual number. Also, my delivery estimate for Q3 on 30 Sep was much higher than the actual number too.
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