Tesla Fell Short of Reaching Production Target in Q2 2022

Tesla (TSLA) just reported second-quarter vehicle production and delivery numbers for 2022. A year ago, Elon Musk's electric car business delivered 201,250 vehicles in Q2. This time around, Tesla blamed parts shortages, supply chain snarls and Covid restrictions that forced China's Shanghai factory to close or operate only partially for weeks – for its failure to reach the target. Indeed, Covid lockdowns in China resulted in a rare drop in production and sales for Tesla in Q2, but was it the main reason for the reported shortcomings?

The EV maker reported that completed sales dropped nearly 18%, to about 255,000 vehicles in Q2 2022 on a quarterly basis. Production fell 15% to 259,000 units.

The company's factory in Shanghai was shut for several weeks in April due to lockdown rules in the city aimed at combating a surge in Covid cases. Problems getting parts from Tesla suppliers also limited Tesla's production even after the plant reopened. According to various estimates, the lockdowns likely cost Tesla production of about 70,000 vehicles in the quarter.

However, the company's statement said the issues Tesla faced in the early months of the quarter are now mostly behind it. "Despite ongoing supply chain challenges and factory shutdowns beyond our control, June 2022 was the highest vehicle production month in Tesla's history," it said.

Although Tesla does not release the geographic breakdown of sales in its monthly sales and production report, we know that only 45% of its revenue last year came from U.S. sales. Most of Tesla's non-US sales came from vehicles built in Shanghai.

Still, it marked the first time since early 2020 that the company experienced a drop in either sales or production compared to the previous quarter. Such drops have been rare at the fast growing company. Even with the falloff in production and sales compared to the ones in Q1 2022, both measures were up from year ago levels, as the company posted a 25% increase in production and a 27% increase in deliveries. Let’s hope for the better!