Tesla (NASDAQ:TSLA) saw its stock surge nearly 5% on Wednesday after reporting second-quarter vehicle deliveries that, while lower than last year’s figures, exceeded some of Wall Street’s more cautious expectations. The rally continued into early Thursday, with shares up an additional 1% by 6:00 am ET.

The electric vehicle manufacturer reported delivering 384,122 vehicles in Q2, a 14% year-over-year drop and the second straight quarter of declining shipments. Still, the number was enough to surprise investors who had braced for a weaker result.

According to Deutsche Bank analyst Edison Yu, the figure was “meaningfully better than feared with buyside expectations leading up closer to 360k,” calling it a “surprising 2Q volume beat.”

Market consensus was slightly higher than the actual delivery figure, with FactSet surveys pointing to a projection of around 387,000 deliveries.

Tesla’s performance varied by region. While demand in China came in just below projections, analysts believe the upside likely came from the U.S. market, where purchases may have been pulled forward ahead of EV tax credit changes. Additionally, sales were stronger in Southeast Asia, with notable gains in Malaysia, South Korea, and Thailand.

By model, Tesla shipped 374,000 units of the Model 3 and Model Y, outperforming Deutsche Bank’s forecast of 343,000 units for those two high-volume vehicles.

“From a margin perspective, we now see some upside to auto gross margin (ex credits) given the volume beat. Looking at 2025, volume growth will still be a challenge considering the EV policy headwinds and delay in Model Q,” Yu added.

Production figures came in at 410,244 vehicles, compared to 443,956 deliveries and 410,831 units produced during the same period in 2023.

Despite Tesla’s recent efforts, competition continues to intensify—especially in China, where local automakers are launching cheaper EV options that appeal to budget-conscious buyers. In the first quarter, Tesla attributed weaker sales in part to consumers delaying purchases as they awaited the updated Model Y, which started shipping in March.

At the same time, CEO Elon Musk has shifted his focus to U.S. and European markets, after stepping back from prior government-linked roles. Analysts believe this renewed emphasis could help drive improved results in the second half of the year.

However, political backlash against Musk and ongoing protests have cast a shadow over Tesla’s public image, potentially impacting demand moving forward. Still, Q2’s unexpected strength suggests Tesla may be finding its footing in a challenging environment.

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