Tesla deliveries fell 31 percent in its first quarter as the electric car maker struggled with its first shipments of the Model 3 sedan to Europe and China due to longer transit times.

In the first quarter, Tesla says it produced approximately 77,100 total vehicles, consisting of 62,950 Model 3 and 14,150 Model S and X.

Deliveries were approximately 63,000 vehicles, which was 110% more than the same quarter last year, but 31% less than last quarter. This included approximately 50,900 Model 3 and 12,100 Model S and X.

"Due to a massive increase in deliveries in Europe and China, which at times exceeded 5x that of prior peak delivery levels, and many challenges encountered for the first time, we had only delivered half of the entire quarter’s numbers by March 21, ten days before end of quarter. This caused a large number of vehicle deliveries to shift to the second quarter. At the end of the first quarter, approximately 10,600 vehicles were in transit to customers globally," Tesla said.

Because of the lower than expected delivery volumes and several pricing adjustments, Tesla expects Q1 net income to be negatively impacted. Even so, the company says it ended the quarter with sufficient cash on hand.

In North America, Model 3 was yet again the best-selling mid-sized premium sedan, selling 60% more units than the runner up. Tesla says that inventory of Model 3 vehicles in North America remains exceptionally low, reaching about two weeks of supply at the end of Q1, compared to the industry average of 2-3 months.

Despite pull forward of demand from Q1 2019 into Q4 2018 due to the step down in the federal tax credit, US orders for Model 3 vehicles significantly outpaced what Tesla was able to deliver in Q1. We reaffirm our prior guidance of 360,000 to 400,000 vehicle deliveries in 2019.

Given that Tesla vehicle production currently occurs entirely from one factory in the San Francisco Bay Area, but must be delivered to customers all around the world, production could be significantly higher than deliveries, as it was this quarter, when production exceeded deliveries by 22%.

Tesla CEO Elon Musk has been engaged in a public battle with U.S. regulators stemming from his tweets about Tesla’s production estimates and a judge will hear the case on Thursday.

Although Tesla said in late February that it would soon begin selling its originally promised $35,000 version of its Model 3 sedan to its North American customers, the change came too late to make a marked difference in its quarterly deliveries.

Introducing Better Navigate on Autopilot

In related news, Tesla is beginning to roll out a new version of Navigate on Autopilot for "a more seamless active guidance experience." In this new version, drivers will now have the option to use Navigate on Autopilot without having to confirm lane changes via the turn stalk.

In the Autopilot settings menu, a driver can press the Customize Navigate on Autopilot button which will now display three additional settings – Enable at Start of Every Trip, Require Lane Change Confirmation, and Lane Change Notification. Through the Enable at Start of Every Trip setting, Navigate on Autopilot can be set to automatically turn on each time a driver enters a navigation route. Once enabled, anytime a driver is on a highway and uses Autopilot with a location plugged into the navigation bar, the feature will be on by default. If a driver selects ‘No’ to Require Lane Change Confirmation, lane changes will happen automatically, without requiring a driver to confirm them first. Drivers can elect to get notified about an upcoming lane change by receiving an audible chime as well as a default visual prompt. Additionally, all cars made after August 2017 will also have the option to have their steering wheel vibrate for the alert as well.

Each of these notifications are meant to provide drivers with the opportunity to check their surroundings and determine whether they want to cancel the lane change before it’s made. Cancellations can be made by moving the car’s turn signal or by pressing the lane change cancellation pop-up notification on the car’s touchscreen. This feature does not make a car autonomous, and lane changes will only be made when a driver’s hands are detected on the wheel.

Through Tesla's internal testing and Early Access Program, more than half a million miles have already been driven with the lane change confirmation turned off. The company's team reviews data from instances when drivers took over while the feature has been in use, and has found that when used properly both versions of Navigate on Autopilot offer comparable levels of safety.

These new settings will be available to Tesla's customers who have purchased Enhanced Autopilot or Full Self-Driving Capability. They will begin to roll out today via an over-the-air software update to customers in the U.S., and will be introduced in other markets in the future pending validation and regulatory approval.