Tesla deliveries beat forecasts as Europe's rebound brightens outlook

Tesla reported strong second-quarter deliveries Thursday, blowing past Wall Street expectations as a rebound in Europe helped fuel hopes that the electric vehicle maker can return to annual growth.

The Austin, Texas-based company delivered 480,126 vehicles from April through June, a record for the second quarter, up about 25% from a year earlier and well above the 402,776 vehicles analysts expected, according to Visible Alpha data.

Tesla produced 451,758 vehicles during the quarter, meaning deliveries outpaced production by roughly 28,000 vehicles as the company worked through inventory built up earlier in the year.

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Strong results from Tesla's mainstay auto business offer a crucial cushion as CEO Elon Musk focuses on expensive ambitions in autonomous driving and artificial intelligence, the main drivers of the company's roughly $1.6 trillion valuation.

Shares of the Austin, Texas-based company were down more than 7% at the close of Thursday. Analysts and investors said optimism had been priced in as the stock gained 12% earlier this week.

Tesla's recovery in Europe was aided by a surge in fuel prices, government EV incentives, faster electrification of corporate fleets and easing of the consumer backlash over CEO Elon Musk's politics.

"I think the huge growth in Europe is the key driver for Tesla right now. U.S. sales still appear to be down, albeit less than the broader U.S. EV decline, while China is seeing small growth," Seth Goldstein, senior equity analyst at Morningstar, said.

Goldstein, who had expected a third straight annual decline, said after the report, "I think it would be very hard to see a decline for the full year at this point."

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Tesla last year introduced stripped-down, lower-cost variants of its Model 3 compact sedans and Model Y SUVs and deployed attractive incentives and financing options.

"Their pricing and their products are helping the buyers overcome any issues they might have with Elon Musk personally," said Sam Fiorani, vice president at research firm AutoForecast Solutions.

Demand in the U.S., Tesla's biggest market, however, remained strained after removal of the EV tax credits late last year. 

"We're cautiously optimistic for some growth this year," Fiorani said.

Analysts said the elimination of incentives for new EV purchases in the U.S. last year continues to weigh on sales, while some refreshes to the aging model lineup have led to stronger performance in the Chinese market.

"We believe Tesla’s U.S. sales likely declined by at least 10% in the quarter," said Freedom Broker senior analyst Dmitriy Pozdnyakov.

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The company's China-made EV sales have risen this year, helped by production of the refreshed Model Y, despite intense competition from BYD and other domestic automakers.

The company said it will report quarterly results on July 22 after markets close.

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Musk briefly became the world’s first trillionaire last month after SpaceX began trading publicly on the Nasdaq at $150 a share, above its $135 IPO price.

Musk’s net worth stood at $982 billion as of Wednesday, according to the Bloomberg Billionaires Index.

Reuters contributed to this report.