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July 2, 2019 6:00 PM, EDT

Tesla Shares Surge as Model 3 Paces Record Quarter of Deliveries

A Tesla Model 3 A worker unloads a Tesla Model 3 electric vehicle from a car carrier outside the company's delivery center in Marina Del Rey, Calif., Sept. 29, 2018. (Patrick T. Fallon/Bloomberg News)

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Tesla Inc. soared in late trading after the electric-car maker set a record for quarterly vehicle deliveries, helped by U.S. consumers rushing to buy Model 3 sedans before a federal tax credit shrank in half.

The electric-car maker handed over 95,200 vehicles to customers in the three months that ended in June, exceeding the previous best mark set in the last quarter of 2018. Tesla’s delivery count easily beat analysts’ average estimate for about 87,700 units.

Tesla shares surged as much a 9.1% in late trading July 2 in New York, which would be the biggest gain of 2019 on a closing basis. The stock was down 33% for the year through the end of regular trading, in part due to demand concerns that Chief Executive Officer Elon Musk has repeatedly dismissed.

Chart showing Tesla deliveries

Musk, 48, pushed employees to “go all out” in the final days of Tesla’s first full quarter in which more affordable Model 3 sedans made their way to buyers in Europe and China, supporting a jump to 77,550 total deliveries. U.S. consumers raced to take advantage of a $3,750 federal tax credit before the incentive dropped to $1,875 as of July 1.

“The big picture is that something is happening around electric vehicles,” said Gene Munster, a managing partner of venture capital firm Loup Ventures. “The Model 3 is on fire.”

Several analysts raised their deliveries estimates as the quarter came to an end, citing brisk sales to key European markets, including Norway and the Netherlands, as well as the effect of incentives that Canada began offering in May to stoke purchases of battery-powered cars.

Graphic comparing Model 3 deliveries with Model S and Model X

Moving more metal won’t solve all of Tesla’s challenges. The company delivered 17,650 Model S sedans and Model X crossovers during the quarter, less than 20% of its total. Investors are concerned the cheaper Model 3 is cannibalizing demand for the higher-margin Model S and X and dragging on profitability.

With the U.S. federal tax credit having shrunk for the second half of the year and ending in 2020, Tesla also may have to lean more on overseas markets to buoy sales. That will test the California-based company’s ability to keep shipping and logistics costs contained. The carmaker is building a car and battery assembly plant near Shanghai, and Musk has said he hopes to pick a location for a similar factory in Europe by the end of the year.