Tesla's delivery report caused short sellers to lose $3.5 billion in two days of trading.

• This week, Tesla shares have increased due to a better-than-anticipated deliveries report for the second quarter.
• The drop in the stock has benefited short sellers, who were betting on a decline in the stock.
• Tesla will provide investors with a clearer view of its finances this month, when it reports quarterly earnings.

This week's better-than-expected deliveries report has been bad news for traders who bet on a drop in the electric vehicle maker's stock.

Since the second-quarter report, short sellers have lost an estimated $3.5 billion on a mark-to-market basis as the shares' value increased by 17% in two trading days.

Tesla shares have surged 73% since their low point in April, leaving short sellers in pain. With a closing price of $246.39 in shortened trading on Wednesday, the stock is now just $2 away from erasing its yearly loss.

The current short interest in Tesla is 3.5% of its float, which amounts to 97 million shares being shorted, with a notional value of $22.4 billion.

On Tuesday, Tesla announced second-quarter deliveries of 443,956, which exceeded Wall Street predictions of 439,000. Despite a 4.8% decline from the previous year, the decline was not as severe as the 8.5% year-over-year drop experienced in the first quarter.

Although the deliveries report indicated that demand for Tesla vehicles is higher than anticipated, it only provided a partial insight into the company's overall performance.

Tesla has been offering discounts, low- or no-interest financing options, and other perks to boost sales of its electric vehicles, which have been declining due to an aging lineup and intense competition.

Tesla offered various promotions in different regions during the second quarter, including price cuts in Germany and Norway, zero-interest loan promos in China, and a three-year, 2% APR financing deal in the U.S. for buyers of its rear-wheel drive Model 3.

In less than a year, four voluntary recalls have been issued in the U.S. due to quality issues with Tesla's newest model, the angular steel Cybertruck.

The financial health of Tesla will become clearer with the release of the company's earnings report later this month. LSEG predicts that analysts will expect a revenue decline of 2.9% to $24.2 billion, following a 9% decline in the first quarter.

According to Ronald Jewsikow, an analyst at Guggenheim Partners, the financing promos on both the Model Y and Model 3 led to significant volume growth. However, as history has shown with other large price cuts and discounts, demand is pulled forward, and new demand must be generated in the third quarter and beyond, which has proven challenging over the past 18 months. Jewsikow has a sell rating on the stock.

Elon Musk, whose net worth has surged by approximately $15 billion in the past two days, reveled in the defeat of short sellers, particularly targeting Microsoft co-founder Bill Gates, who has a history of shorting the stock and engaging in conflicts with Musk.

""If Tesla successfully resolves autonomy and produces Optimus in large quantities, anyone still holding a short position will be completely wiped out, including Gates," Musk stated on X."

Tesla is currently developing a humanoid robot, Optimus, which Musk claims will make the company worth tens of trillions of dollars in the future. Tesla's current market cap is below $800 billion.

Meanwhile, Tesla's challenges in its core, automotive business remain.

Although Tesla has not yet delivered software that enables its existing cars to operate autonomously, the company frequently updates its in-vehicle software and the latest version promises to include YouTube, Amazon Music, weather, and air quality apps.

A recent poll by Axios-Harris found that brand deterioration at the company is partly due to Musk's "antics" and "political rants." Additionally, a New York Times survey this week revealed that Musk's "polarizing statements" and "political activity" are driving away some "left-leaning consumers."

In upcoming U.S. elections, Musk has called for a "red wave" and has stated that he frequently speaks with former President Donald Trump. Additionally, Musk has shared, liked, and promoted far-right accounts and content on X. On the other hand, research from Pew Research and Gallup last year revealed that proponents of electric vehicles tend to be politically lean left.

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