The maker of Model S sedans and Model X sport utility vehicles has reported quarter-by-quarter shipment declines for the second time in the past year. In addition to stoking fear about whether demand has peaked, these figures cast doubt on whether Musk can pull off a steep production ramp for his most ambitious offering yet, the cheaper Model 3 sedan.
“Tesla’s Q2 production and deliveries report raised more questions than answers, particularly about Model S and X demand,” Toni Sacconaghi, a Sanford C. Bernstein analyst, wrote in a report Wednesday. “The Tesla investment thesis hinges on the success of Model 3, and the ability for the company to ramp production, make the car profitably and deliver good initial build quality.”
Musk blamed the flat quarter not on weak demand, but on battery supply issues. But Tesla can’t afford supply issues on their most critical component at boutique volumes if they’re going to make the promised leap to mass manufacturing.