Tesla’s record quarter calms fears about Model 3 demand, but there’s a big question about whether the company hurt profits to boost sales

Tesla delivered 95,200 vehicles between April and June, beating Wall Street estimates and setting a record for vehicle deliveries in one quarter.

The electric-car maker’s second-quarter delivery numbers were subject to intense scrutiny, since deliveries fell 31% between the fourth quarter of 2018 and the first quarter of this year. Tesla blamed issues with delivery logistics and seasonal demand, but some argued that demand for the company’s vehicles was lower than it had projected.

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The delivery record suggests that there is still strong demand for the Model 3, which made up 81% of Tesla’s second-quarter deliveries.

“Investors feared everyone that wanted an EV had already bought one and deliveries would continue to fall,” Gene Munster, a managing partner at Loup Ventures, wrote in a note on Thursday. “Today’s record-high Model 3 production and deliveries should largely put an end to those fears. It’s clear that demand is strong and growing as they continue to enter new markets.”

But the strong delivery numbers come with a question that will be answered when Tesla releases its second-quarter earnings: Did the company sacrifice profits to boost sales?

Since the end of the first quarter, Tesla has cut the price of its Model S sedan and Model X SUV while making Autopilot, a driver-assistance system whose basic features used to cost $US3,000, standard on all of its vehicles.

“I think what everyone’s now concerned about is, well, did you sacrifice profit for volume?” David Whiston, an automotive analyst at Morningstar, said.

Tesla raised $US2.7 billion in May, but the company’s ability to move toward consistent profits will become more important as it works on expensive projects with significant potential benefits, like building a factory in Shanghai – which will reduce import costs to China, the biggest auto market – and introducing the Model Y SUV and a pickup truck in the coming years, which will give Tesla access to segments of the auto market that have produced big profits.

“I don’t think we should just assume everything’s awesome and perfect now just because they had a record delivery quarter,” Whiston said. “It’s certainly good news, but again, it’s one quarter.”

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