Anything That Ignites Fears Tesla’s Big Model 3 Release Won’t Go as Planned Could be Met Harshly

Considering the degree to which Tesla Inc. (TSLA) has been a company valued, analyzed and judged based on the sales potential of mass-market cars that haven’t launched yet, a major selloff on account of a slight quarterly delivery shortfall for the company’s existing, costlier vehicles is a little strange at first glance. Especially since Tesla chalks the shortfall up to a manufacturing issue that has been resolved.

But the selloff becomes a little more understandable when one remembers how much has been priced into Tesla’s shares following an epic 7-month rally. And a little more still when one considers how Tesla’s delivery shortfall — hardly the first of its kind — might be stoking fears that Tesla won’t hit the very aggressive production targets it has set for the coming months and years.

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After the bell on Monday, July 3, Tesla disclosed it delivered “just over 22,000 vehicles in Q2, of which just over 12,000 were Model S [sedans] and just over 10,000 were Model X [SUVs].” It added that 25,708 vehicles were produced, and said it’s confident Model S and X deliveries will rise in the second half of 2017 relative to the first half provided macro conditions “do not worsen considerably.”

Though up 53% annually, deliveries fell from a reported Q1 level of 25,051, and were roughly flat with a Q4 level of 22,252. They missed a consensus analyst estimate of 24,000, and resulted in Tesla just barely hitting a first-half delivery guidance range of 47,000 to 50,000. Production rose 40% annually, but grew just slightly from Q1’s 25,418 and Q4’s 24,882.

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Shares fell 7.2% on Wednesday to $327.09, and are now down 15% from a late June peak of $386.99. But they’re still up 51% in 2017, and leave Tesla sporting a $52.4 billion market cap — higher than Ford Motor Co.’s (F) and just slightly below General Motors Co.’s (GM) .

Tesla primarily blamed its Q2 delivery weakness on “a severe production shortfall of 100 kWh battery packs, which are made using new technologies on new production lines.” It claims production was “about 40% below demand” until early June, and insists deliveries were strong after the issue was resolved.

That sounds believable enough. But one can’t forget that Tesla also had a delivery shortfall in Q4 2016. That time, the company blamed “short-term production challenges” related to its Autopilot 2.0 hardware.

Likewise, Q2 2016 deliveries of 14,402 and production of 18,345 respectively missed guidance of 17,000 and 20,000. That time around, Tesla blamed challenges related to a “steep production ramp.” Due to the Q2 and Q4 shortfalls, 2016 deliveries came in slightly above 76,000, missing original guidance of 80,000 to 90,000.