As the company recently reported its fourth-quarter and full-year results for 2018, it's a good time to start looking ahead at what the electric car company Tesla (NASDAQ: TSLA) can achieve in 2019.
Last year, Tesla registered extraordinary growth, delivering almost as many vehicles during the year as it has done in all its previous combined years. Can the company publish another year of strong growth after increasing deliveries so drastically in 2018? Probably, and here's why.
An increase of around 55% is expected.
Fortunately, the administration provided its own forecast of what to expect from vehicle deliveries in 2019. In the letter from Tesla's fourth-quarter shareholder, the administration said it expects to deliver between 360,000 and 400,000 vehicles during the year. This represents a year-on-year growth of 45% to 65% compared to the approximately 245,500 vehicles that Tesla delivered in 2018.
But can investors trust the direction of management? After all, the company has lost key production and delivery objectives in the past. Fortunately, this time Tesla seems to be approaching his orientation conservatively.
While reaching the midpoint of Tesla's guidance range for vehicle deliveries would require an annual growth of 55%, it would not take a significant increase in the company's production rate to achieve this. The company delivered 90,966 vehicles in its fourth quarter. This translates into an annual execution rate of around 364,000 vehicles, above the lower limit of the administration's guidance range. In other words, to increase annual deliveries by 48% year after year, all Tesla would have to do is maintain the quarterly delivery rate with which it came out of 2018.
But is there a demand there? Almost with security. Of the 90,966 vehicles that Tesla delivered in Q4, 63,359 were Model 3, all of which were delivered in North America. In 2019, Model 3 is expanding to Europe and China, giving vehicle demand a significant tailwind.
Combine Tesla's rapidly growing history of vehicle production and the company's recent aggressive drive to sell Model 3 at lower prices, and an estimate of deliveries that will increase 55% year-on-year to 380,000 points. let it sound conservative.
Tesla Model S vehicles parked in front of a dealership in Shanghai. Thanks to the high volume of production of the Model 3 and the global expansion, an annual increase of 55% is unlikely. Photo: JOHANNES EISELE / AFP / Getty Images
What about the high-end Tesla guide?
For Tesla to deliver 400,000 vehicles in 2019 or, better yet, exceed its guidance range, the company will likely have to bring to market the promised $ 35,000 version of Model 3. A $ 35,000 version of the vehicle, which is $ 7,900 less than the cheapest model version 3 available today, would open Tesla to a much broader customer base, which would easily boost the vehicle's demand high enough for the company to reach the highest level of its targeting range.
Tesla says his website expects the lower-cost version of the car, which will have a smaller battery than its current Model 3 variants, to be available in four to six months.
But investors should not have this cheaper version. When asked about the promised $ 3,000 model on Twitter this week, Musk said: "We're doing everything we can to get there, it's a super tough routine."
This article originally appeared in The Motley Fool.
Daniel Sparks owns Tesla shares. The Motley Fool owns shares and recommends Tesla. The Motley Fool has a disclosure policy.