Written by Norman Isaac Mwambazi

Tesla vehicle deliveries hit another record in Q3, Elon Musk says U.S. electricity production needs to double

Tesla Inc. (ticker: TSLA), a California automaker, announced last week on Saturday, October 2, 2021, that it hit a new …

Tesla Inc. (ticker: TSLA), a California automaker, announced last week on Saturday, October 2, 2021, that it hit a new record in the third quarter of the 2021 fiscal year (Q3 FY2021) after its vehicle deliveries exceeded Wall Street expectations for the period between July and September.  

In the July to September period, Tesla said that it delivered 241,300 vehicles globally, beating Wall Street analysts who had expected the company to deliver 229,242 vehicles in that period. Tesla’s delivery in Q3 is up 73% from the same quarter a year ago.

Tesla Chief Executive Officer (CEO) Elon Musk urged his employees in an internal memo to “go super hard-core” in pushing deliveries this quarter, adding that the end of the quarter delivery wave is unusually high this time.”

The figures show that Tesla has worked hard to hit record deliveries amidst computer chip shortages that have dealt a big blow to the automotive industry this year. Some companies put on hold production of some car models to focus on only the high demand, profitable models. Tesla’s Q3 deliveries have soared up to 20% from what the company delivered in Q2 FY2021, making this quarter the company’s sixth consecutive quarterly gain.

Its China wing has boosted Tesla’s production and delivery figures through exports to Europe and the introduction of a cheaper Model Y. The company said in its announcement that of the total 241,300 vehicles delivered in Q3, 232,025 were Model 3 Compact and the more affordable Model Y sport-utility vehicles, while the remaining 9,275 were Model X and Model S vehicles.

However, as Tesla’s demand in China keeps growing, the company’s competition is also growing from local electric vehicles (EV) producers like Li Auto Inc. (ticker: LI) and Nio Inc. (ticker: NIO) among others, as well as scrutiny from Chinese regulators that have been targeting tech giants in the previous months. Tesla is yet to release its September China sales. Still, in August, the company announced that its factory in Shanghai exported more than two-thirds of its vehicles to Europe and Asia.

As major competitors General Motors (ticker: GM) and Japanese auto giant Honda (TYO: 7267), among others, saw their U.S. sales decline to as low as 33% for the former in Q3, total production for Tesla grew over 15% in the same period. General Motor’s decline was the lowest for the company in more than 10 years.

Elon Musk demands more electricity production in the U.S. to power electric cars

As manufacturers transition to cleaner energy and reduce their carbon footprint to net-zero by 2050, electric cars are seen as an alternative. For large car manufacturers to achieve this goal, electricity production has to be at its highest. Tesla CEO Elon Musk is asking U.S. electricity producers to double their output to power EVs.

“If we shift all transport to electric, then electricity demand approximately doubles […] this is going to create many challenges with the grid,” Musk said, according to Yahoo Finance.

Musk’s statements about doubling power production carry a lot of weight since Tesla is widely regarded as the first successful American car manufacturing start-up in 90 years. Founded in 2003, the company has gone on to become one of the leading EV producers in the world, with a market capitalisation of $767.48 billion. The company was last year included on the benchmark S&P 500 Index after posting five consecutive profitable quarters. Early this year, Tesla’s stock price surge briefly made Musk the richest man in the world, a position he has reclaimed in the past few weeks.

As cars transition from being powered by gas pumps to electric chargers, electricity producers will need to generate a lot more power to meet the increasing demand and prevent blackouts. However, the possibility of a blackout happening in cities caused by electric cars is still a long way from now, as all-electric cars make up only 1% of the current 276 million vehicles (cars, buses, trucks, motorcycles) in the U.S.

It is predicted that by 2030, this percentage will have increased by 15%, about 50 million all-electric cars on the U.S. roads, but power experts say that this would still be too little to cause an electricity crisis in the country. EV penetration is still low, and power producers still have time to plan. If 90% of vehicles on U.S. roads are all-electric by 2040, then Musk’s statements will have to be put in action because the current U.S. electricity production would not be enough to power homes, factories, and cars all at once.

However, more power production will come with more demand for other things like more space in cities for new power lines and more charging spots. Musk says this can be solved partly by having local power generation stations. That is when Tesla’s solar roof battery backup power systems will come in handy for households to generate their own power.

Speaking about large scale power production, Musk said that, “We need large sustainable power generation developments paired with battery packs for continuous power,” adding that numerous good things are happening in all this cycle of electric vehicles and power production. Demand will need supply, which will create more demand companies in that line of business will try to meet over the years.

Tesla stock

After announcing the new record broken, one would think Tesla’s stock would spike on the good news. That is not what happened. Tesla’s stock remained largely unchanged on Sunday, but it has opened strongly this morning. In today’s premarket trading session, Monday, October 4, 2021, Tesla was trading 2.87% higher, but it has since slightly dropped 0.062%, trading at $774.74 a share.

Tesla’s stock has had a slow growth this year, rising a disappointing 6.23% year to date, compared to S&P 500’s 17.74% in the same period. Tesla is expected to release its Q3 FY2021 earnings report on October 20, 2021, and that is when we expect to get the company’s China September sales report as well.