Tesla (TSLA) has had a sudden drop in wait times for deliveries on new orders on some of its electric vehicle models, and some are reading into it as demand falling off, but there’s more to it.

In recent weeks, industry watchers have noted that Tesla’s delivery wait times have dropped significantly. Some models that Tesla was quoting up to six months for delivery just recently are now listed as available in weeks.

Many, especially the usual Tesla naysayers, are using this as “proof” that demand is “falling off.”

However, there’s a lot more to it than that.

Sources familiar with the matter told Electrek that Tesla is not experiencing any demand issue, but there are discrepancies between its order book and production allocations for certain versions of its vehicles that are resulting in some openings, especially at the end of the quarter, for faster deliveries.

Due to Tesla’s direct-sale business model, the company is responsible for its vehicles until they are in the hands of the customers. The inventory doesn’t go through a car dealership, and therefore, it’s up to Tesla to keep inventory low and match production to orders.

Depending on the demand for certain models and production capacity per model, there can be discrepancy that creates volatility in wait times.

In fact, Tesla recently even stopped taking new orders on some models in order to address its long backlog.

Pierre Ferragu of New Street Research, a Wall Street analyst covering Tesla, sent a note to clients this week to warn them not to read the wait times dropping as demand dropping:

Do not read a sudden drop in wait time too fast. Our analysis suggest the recent sudden 40-60% drop in wait times Tesla indicates for new orders only reflects a normalization of the backlog, after an acceleration in the first half.

He added in the note:

Understanding wait time volatility. Even with orders steadily growing, irregular increases in production capacity mean wait times will remain volatile. Our analysis clearly suggests orders are reaccelerating this quarter, despite the drop in indicative wait times.

In fact, Ferragu expects an increase in orders and deliveries while both the end-of-quarter backlog and wait times continue to drop during the rest of the year:

Production ramps at Gigafactory Berlin and Gigafactory Texas are also resulting in better product localization and contributing to reduced wait times.

New Street Research maintains a $530 target price on Tesla’s (TSLA) stock, and it expects the automaker to surprise investors with a “monster” quarter in Q3 with record free cash flow.

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