By Aditya Soni

Tesla may miss estimates for third-quarter deliveries due to planned factory shutdowns and soft demand that led the automaker to boost discounts, several Wall Street analysts warned in the run-up to the report that could come as early as Sunday.

Brokerages including Barclays, Baird and Guggenheim blamed the potential weakness on downtime at the automaker's plants in Europe and China to upgrade equipment and prepare for the production of the updated Model 3 sedan and the Cybertruck.

But the retooling could help power a strong fourth quarter by allowing Tesla to refresh its aging vehicle line-up with models that could compete better with offerings from U.S. rivals such as Ford and BYD in China, the brokerages said.

They estimate Tesla will hand over between 439,200 and 455,000 vehicles in the September quarter. That is below the overall Wall Street expectation of 458,713 vehicles, according to an average of 11 analysts' estimates compiled by LSEG.

The LSEG figure implies a 1.6% decline in deliveries from the previous quarter. That would mark the first sequential decline in Tesla's deliveries since the second quarter of 2022.

Some analysts said a disappointing report could spark the need for more price cuts to drive sales in the face of rising competition and a broader slowdown in electric-vehicle demand.

"It's not just supply issues, demand signals remain weak," brokerage Guggenheim said in a note this week. "We would expect price cuts to be needed in future quarters."

That would come at the cost of Tesla's industry-leading margins, which already plumbed a four-year low in the second quarter due to the price war the company started in January.

In the third quarter, Tesla slashed prices of its Model S and Model X by 14% to 21% in main markets China and the U.S. It also increased discounts on its mainstay Model 3 and Model Y to as much as over $5,000 in the United States, while cutting prices of Model Y and offering other incentives in China.

The company also cut its production plan at its German factory amid soft demand, a report by Business Insider said.

OPTIMISM FOR Q4

Some analysts believe Tesla could rebound in the last three months of the year, thanks to the updated Model 3. The restyled variant comes with a higher price and is expected to launch in Europe and China in the fourth quarter.

"Early reviews of the refreshed Model 3 have been positive and changes in wait times suggest that demand is strong, particularly in China," Baird said. "The updates will provide a boost to demand during the challenging environment."

Some investors are also optimistic about Tesla's prospects in the face of an autoworkers' strike at the Detroit Three.

The strike against Ford, General Motors and Stellantis is close to entering its third week and any cost increase from a potential new contract with the United Auto Workers union will pile pressure on the legacy automakers at a time they are already losing billions of dollars in their EV businesses.

"You really don't want to put your money in Ford or GM right now, and for many U.S. investors, Tesla is the only other game in town," said Thomas Martin senior portfolio manager at Globalt Investments, which holds Tesla shares.

"So that should put a floor underneath the stock somewhere."

Tesla shares have declined about 5% this month on expectations of a delivery miss. But they have nearly doubled for the year.

(Reporting by Aditya Soni and Jaspreet Singh in Bengaluru; Additional reporting by Hyunjoo Jin in San Francisco; Editing by Shounak Dasgupta)