Elon Musk: There is not a demand problem for the Tesla Model 3

Tesla CEO Elon Musk’s opening comments went straight to a question that has been looming over the automaker since it reported wider-than-expected losses and a one-third drop in deliveries in the first quarter: demand.

“We get this question a lot. I want to be clear, there is not a demand problem,” Musk said.

But he didn’t stop there. Musk quickly added that sales have far exceeded production. “Production has been pretty good,” Musk said. “So Tesla has decent shot at a record quarter on every level — if not it’s going to be very close.”

Tesla reported in April that it delivered 63,000 of its electric vehicles in the first quarter of the year, nearly a one-third drop from the previous quarter. Tesla cautioned, at the time, that it expected first-quarter profits would be negatively impacted by lower than expected delivery volumes and several pricing adjustments.

And that proved out, when just a few weeks later Tesla reported wider-than-expected loss of $702 million, or $4.10 a share.

Tesla blamed the striking difference in numbers on its efforts to increase deliveries of its Model 3 electric car in Europe and China, which was fraught with challenges and caused delays.

But the losses and lower delivery number prompted widespread speculation that Tesla had what looked like demand issue, a problem it had never experienced before.

Musk tried to quell those concerns during the shareholder’s meeting Tuesday in Mountain View, Calif. He said that 90% of the new orders from coming from non-reservation holders and that 63% of its trade-ins are from non-premium categories. “Which means people are trading up to buy the Model 3,” he added.

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