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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