By Tim Higgins 

Tesla Inc. said first-quarter deliveries of its electric vehicles rose 40% compared with a year ago, while not addressing how the coronavirus pandemic might hurt future sales.

Investors are eager to better understand how the Silicon Valley electric-car maker expects the global slowdown to affect Chief Executive Elon Musk's growth plans, which have called for deliveries to increase more than 36% this year compared with last.

Those ambitions to deliver more than 500,000 cars look to be in jeopardy as Tesla's lone U.S. factory in Fremont, Calif., sits temporarily idled because the local government has demanded nonessential businesses remain closed into next month.

The company on Thursday said it delivered 88,400 vehicles compared with 63,000 during the year-ago quarter when Model 3 compact-car deliveries were ramping up overseas.

Analysts surveyed by FactSet on average had predicted 89,000 vehicle deliveries during the period, a figure that was scaled back in recent weeks from 106,000 projected in late January.

Tesla shares rose around 13% after it posted delivery figures.

Some analysts had been lowering their expectations for the first and second quarter. Still, several have questioned if overall expectations by Wall Street had remained too lofty, saying that some investors were privately whispering about a much lower number for the first quarter.

"We believe that these consensus numbers are artificially high/stale given the Covid-19 outbreak mid-quarter, and thus many of our peers have not reduced numbers yet to reflect the ensuing demand dynamics and the Fremont shutdown," Daniel Ives, an analyst for Wedbush Securities, warned investors on Monday. He expected Tesla to deliver 82,000 vehicles during the period.

As with most major auto makers, the first three months of the year are historically Tesla's worst. Last year's first quarter was especially troublesome, as the company struggled to begin delivering the Model 3 overseas for the first time.

Once those hiccups were overcome, the new sedan helped fuel a record 367,500 sales globally in 2019, and the company seemed headed for a banner year with analysts predicting it could turn its first annual profit in 2020.

Before the global pandemic, Mr. Musk promised the sharp rise in deliveries, betting the arrival of the new Model Y compact sport-utility vehicle and opening of an assembly plant in China would continue to stoke growth. Deliveries from the China plant began late last year and first Model Y customer deliveries took place last month in the U.S.

On Thursday, Tesla said it had delivered a combined 76,200 Model 3s and Model Ys compared with 50,900 Model 3s a year ago. The combined sales of the larger Model S sedan and Model X SUV rose to 12,200 from 12,100.

While targeting dramatic growth, Tesla in late January cautioned that the effects of combating the coronavirus in China might hinder the first-quarter results. That was before the virus began rocking financial markets globally and countries around world-wide began shutting down businesses and daily life.

Researcher LMC Automotive has cut its industrywide full-year new-vehicle sales projection by 14 million units to 76 million for 2020, which would represent a 15% decline from 2019.

On March 23, the auto maker stopped assembly in California following pressure from local authorities to shut nonessential businesses to allow residents to shelter-in their homes.

Tesla hasn't said when it might resume production. The local county government, which has designated Tesla a nonessential business, says operations deemed not essential must stay suspended until May 3.

Mr. Musk had drawn criticism for playing down concerns about the coronavirus and his initial defiance to closing the plant. More recently, Mr. Musk has suggested that Tesla might join General Motors Co. and Ford Motor Co. in helping make ventilators that are in short supply at many hospitals.

Analysts have gradually scaled back their projections for full-year deliveries, now forecasting on average 464,000 Tesla vehicles this year, which would represent a 29% rise. Joseph Osha, an analyst for JMP Securities, cut his year-total prediction by 90,000 vehicles, front-loading his assumptions that the pain will follow in the first half of the year.

Other auto makers saw sales slow in China in the early part of the first quarter when the coronavirus hit hardest there. U.S. sales lagged behind during the quarter's final few weeks as the pandemic spread to America.

Tesla has tried to reassure investors that it can weather the crisis, stressing last month that it had enough cash on hand to handle the uncertainty.

Meanwhile, Tesla, like many companies, remains in a state of limbo. It is a status to which the car maker is unaccustomed. For much of its 16 years, Tesla has defined itself around the challenge of racing to increase production fast enough to meet demand for its cars, even if some questioned how much demand existed for expensive, fully electric vehicles. Now, Tesla faces two new unknowns: When will it be able to resume production at its Fremont factory; and will customers still have the spending power after it does?

"We think a longer-term economic downturn could adversely impact demand for several quarters, which could be an overhang on shares," Ben Kallo, an analyst for Robert W. Baird & Co., said in a note.

Write to Tim Higgins at Tim.Higgins@WSJ.com

 

(END) Dow Jones Newswires

April 02, 2020 17:25 ET (21:25 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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