Tesla also claimed that, as of the end of the third quarter, its "passenger vehicle backlog reached its highest level in four years." However, the data in the same letter does not support a company where "buyers outnumber cars."
Tesla's new explanation for flat sales
The term "battery" has been in use for some time. In the second quarter, Tesla stated that battery pack production was "the primary constraint on increasing vehicle output in the short term." Now, it says that batteries are limiting the number of vehicles the company can sell this quarter.
Tesla did not provide specific numbers for its backlog of orders. However, the company reported record delivery volumes in Canada, Australia, Japan, and Taiwan, as well as record production at its Berlin Gigafactory. In its Q3 2026 earnings report, Tesla also stated that, due to "strong demand," the company is focused on "increasing production at all factories."
What do Tesla's own data indicate?
Tesla delivered 486,532 vehicles in the third quarter, a 2% decrease compared to 497,099 vehicles delivered in the same period last year. Deliveries of the Model 3 and Model Y declined by 1%. Deliveries of "other vehicles," including the Cybertruck, Semi, and remaining Model S and Model X units, fell 48% to 8,295 units.
The company produced 464,391 vehicles this quarter, resulting in deliveries exceeding production by 22,141 units. This marks Tesla’s second consecutive quarter of inventory reduction; in the first quarter, the company produced approximately 50,000 more vehicles than it sold. Global inventory has declined to an 11-day supply, down from 27 days in the first quarter and 15 days in the second quarter.
The annualized production of the Model 3 and Model Y is approximately 1.83 million units. Tesla states that the combined installed capacity for these two models at its facilities in Fremont, Shanghai, Berlin, and Texas exceeds 2.25 million units, resulting in a factory utilization rate of approximately 81%.
The illogical part is here. When explaining why revenue did not grow, Tesla mentioned that, even excluding currency effects, the average selling price (ASP) of vehicles declined year-over-year. Typically, automakers unable to produce cars quickly enough would raise prices—or at least stop offering discounts.
Where do Tesla's batteries go?
Compared to the past, Tesla now has more options for battery utilization. The same letter stated that the energy storage business has set new records for order intake and backlog, with the Texas Megafactory now in production and planned capacity of 50 GWh. Meanwhile, Tesla is increasing production of its 4680 batteries to support ramp-up of the Cybercab and Tesla Semi, as well as higher Model Y output.
Tesla's outlook even states that deliveries depend on "allocation decisions between sales to customers and use in Tesla's own fleet and operations." In other words, part of the battery constraint is actually a decision made by Tesla itself regarding where to direct its batteries.
Electrek's perspective
Battery supply is indeed a real issue, and the tariffs on Chinese batteries in the U.S. have made the situation even more challenging. While Tesla has set records in a few markets, overall deliveries are declining, and the company is selling its vehicles at lower prices than before. These factors do not resemble those of a company severely constrained by supply.
In fact, by 2026, Tesla will have more battery suppliers than ever before, and it is also expanding its own battery production.
However, “we are supply-constrained” has long been one of Tesla’s most frequently used statements, and this letter does not prove it. Deliveries have declined year-over-year, and prices have also dropped. Two quarters ago, Tesla produced 50,000 vehicles that it couldn’t sell. If batteries were truly the bottleneck, Tesla should have raised prices and retained the additional profits rather than lowering its ASP.
A more likely answer is that both factors are at play: some demand has returned to the market, and Tesla has chosen to allocate more batteries to Megapack, Cybercab, and Semi, as it views these businesses as more valuable. This is a reasonable strategy, but it is not the same as having more buyers than it can serve.
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