We’ve been closely watching how Tesla (NASDAQ:TSLA) has fared throughout the Coronavirus outbreak and seeing how it has affected Tesla’s business.
As of the time of this writing, the Tesla Fremont Gigafactory remains closed and has been shut down since March 23rd.
How Are Vehicle Deliveries Going to Be Impacted?
It will be interesting to see delivery numbers for Tesla for the Q1 2020 quarter, which Tesla is expected to release a report with the details very soon in the next few days or weeks.
Unfortunately for Tesla, the first quarter of the year usually experiences a steep drop in car sales with January and February faring the worst and sales beginning to pick up in March.
Last year’s Q1 deliveries seem to be the weakest in a long time.
Obviously, with the current crisis, analysts are expecting to see an even sharper drop in delivery numbers compared to the drop in the same quarter last year.
For reference, according to Credit Suisse analyst Dan Levy, Tesla was expected to do about 3,000 vehicle sales in China per week under normal circumstances in the beginning of the year with the Chinese New Year holiday season.
But for the first two months of 2020, Tesla’s vehicle sales in China were around 700 vehicles sold per week, down 75% .
Tesla often also does manufacturing and deliveries in waves, with markets like China or Europe seeing deliveries earlier in the quarter and orders closer to home in the US receiving deliveries later in the quarter.
Due to the closer distance from manufacture to customer in the U.S. Tesla can wait longer to manufacter a car because delivery can be done so quickly, still meeting the customers delivery date.
This wave methodology might have coincidentally worked against Tesla as China and Europe were suffering the worst effects of the Coronavirus outbreak earlier on in the quarter and the US suffering the worst effects later on in the quarter.
According to InsideEVs, Tesla’s production for Q1 2020 should easily exceed 100,000.
According to Hyperchange, a research firm focused on disruptive innovation and companies such as Tesla, Q1 2020 deliveries are expected to come in at around 65,000 vehicles.
Although this still represents about a 5% gain from the same quarter last year, it’s a far cry from Q4 2019 which Tesla reported over 110,000 deliveries.
We will have to see exactly how many of those cars they were able to deliver.
What About The Model Y?
Tesla’s new SUV-crossover vehicle, the Model Y has officially gone into production and deliveries started on March 13.
Right now, there are only two versions of the Model Y for sale, namely the Dual Motor and Performance editions.
Tesla has planned for a cheaper Rear-Wheel Drive and single motor edition of the Model Y which is only available for pre-order at the moment.
However, according to Electrek, Tesla has recently been reaching out to customers who have pre-ordered the single-motor Model Y to ask them for payment information and claiming that the deliveries might be imminent.
Originally, Tesla has estimated that the single motor Model Y would not be available until the second half of 2020, so the fact that Tesla is focusing on filling the orders of the rear-wheel-drive Model Y may be an indication that demand for the other 2 models has dropped dramatically.
Some rumors suggest that customers are canceling their orders for the Model Y, which would make sense since the Long Range Dual Motor starts at around $53,000 and the Performance edition coming in at over $60,000 and the current crisis is leaving more people financially insecure.
These are still very expensive cars when you consider the average price paid in the U.S. is around $25,000.
If we were to fall into a sustained recession, less people will be inclined to buy cars and if they do it will be a lower price point.
We do have some evidence to suggest a fall in demand for Tesla vehicles, according to Cargurus.com, which pools data for used car listings, there has been a noticeable decline in the average selling price of Tesla vehicles in the US in Q1 2020.
Note that this is for Tesla vehicles altogether, not just for the model Y, so it would be logical that the fall in demand is happening across the board to not just the Model Y but the rest of Tesla’s lineup including the Model S, X and 3.
Is There Light At The End Of The Tunnel?
With all this bad news, is there anything to be cheerful about regarding Tesla? Well, yes.
Tesla’s cash position remains relatively strong with about $8B of cash on its balance sheet.
This strong cash position comes after Tesla raised over $2B in a new stock offering which turned out to be an incredibly well-timed decision as the stock was trading north of $800 per share at that time.
So despite all this negativity, we do have some indication that Tesla will be able to pick up the slack in the long term. This is because Tesla’s operations in China is already ramping back up.
Tesla has had the Shanghai Gigafactory up and running for over a month now, and the company recently reopened its showroom in Wuhan, China, which was the epicenter of the entire COVID-19 outbreak.
This is an indication that things are slowly returning to normal in China and indicates potentially where the US and parts of Europe could be in a few months from now.
We will be closely watching what Tesla has to say about their outlook for Q2 2020 and how results are trending with their Chinese operations when the company reports its next earnings quarter.
The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Grizzle hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.