Tesla Shorted Shares Dropped Before Vehicle Deliveries Report; Shanghai Gigafactory Severely Underutilized?

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Electric vehicle and energy products manufacturer Tesla Inc (NASDAQ:TSLA) posted its official vehicle delivery figures for the first quarter of 2020 yesterday. The company beat Wall Street estimates and posted its strongest first quarter in history despite a global drop in purchasing power and manufacturing due to the outbreak of the coronavirus (COVID-19).

Following a strong production ramp-up in its Shanghai Gigafactory, Tesla's stock price soared to new highs on the open market, wiping out short positions in its wake. However, the stock's peak in mid-February would show that even the most astute traders would go on to miss the selling rally initiated by COVID-19.

Now, given Tesla's strong quarterly performance report yesterday, it's time to take a closer look at the data and look at what the company's shorters are thinking.

Tesla's Shorted Shares Dropped By Roughly One Million Day Before It Announced Q1 Vehicle Deliveries

In data gathered and analyzed by S3 Partners LLC, investors who have bet against Tesla on the open market continued to close their positions until mid-day, hours before the company announced its vehicle delivery figures for the first quarter of 2020. In the months between January and April, the automaker has delivered 88,400 vehicles after having manufactured roughly 103,000 vehicles during the quarter. Out of the 88,400 cars delivered by Tesla, 76,200 were Models 3 and Y and 12,200 were Models S and X.

Data for the company compiled by the market research firm shows that as of mid-day on April 1st, short interest for Tesla stood at $8.34 billion with 15.94 million shares of the company shorted. The total number of Tesla shares shorted fell by 745,000 shares by April 1st despite the stock price itself dropping by 22% over the last thirty days reports S3 Partners. Overall, Tesla's short sellers have lost roughly $3.86 billion in 2020 so far in terms of mark-to-market losses and profited around $350 million the day before the company announced its vehicle deliveries as the share price dropped by 4.20%.

Naturally, despite the fact that shorted shares have fallen, there's good reason to believe that investors betting against Tesla will maintain their positions now at a time when Wall Street consensus suggests that the company will be unable to meet its vehicle delivery target of 500,000 units for the full year 2020.

Tesla Inc short interest movement with price fluctuations/S3 Partners

Shanghai Gigafactory Might Be Underutilized For Breaking Even Suggest Figures

Diving deeper into the company's vehicle deliveries for the first quarter of 2020, data shared by Dean Sheikh on Twitter shows that despite posting its best first-quarter result in history, things might not be as rosy as they initially appear. According to him, 15,000 of Tesla's deliveries during the quarter came from the company's Shanghai Gigafactory, leaving 73,000 cars left that can be attributed to production in the company's Fremont plant.

If true, then this figure as-per-Sheikh, marks for a 40% sequential drop for deliveries made from the Fremont plant, resulting in a $528 million gross margin hit to Tesla's balance sheets in the quarter. More worryingly, as Dean points out, is the fact that 15,000 vehicles manufactured and sold from the Shanghai Gigafactory represent a capacity utilization of roughly 38% for the plant, nearly half of the industry standards for a facility to break-even.

Commenting on the output from the Shanghai Gigafactory in its vehicle delivery report yesterday, Tesla reported that output from the plant stands at record levels despite significant setbacks. Electric vehicle sales in China for the month of February show that Tesla's Model 3 is the top-selling electric vehicle in the country, growing its vehicle registrations eleven times year-over-year at a time when the market itself shrunk by 72%. Data suggest that in the first two months of 2020, 5,467 Model 3s were registered in China - leaving roughly 10,000 cars to be registered in March if Dean's numbers are to be assumed as correct.

Shares of Tesla Inc are up 14.39% in pre-market as investors respond positively to yesterday's report. The stock is up by roughly 5.5% year-to-date at a time when major indexes are struggling to recover after having taken a beating from the coronavirus.