- Tesla blew Wall Street expectations out of the water Thursday when it reported more than 90,000 vehicles sold in the second quarter.
- The figure was only a slight decline compared to slumps as big as 34% by its Detroit peers.
- Auto sales have recovered faster than some analysts have expected — but it’s not clear how sustainable the resurgence may be.
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Automakers have released their second-quarter sales numbers from the depths of the coronavirus pandemic, and the results aren’t pretty.
The major Detroit automakers reported Q2 numbers this week that fell dramatically across the board. General Motors reported a 34% decline over the same period last year, while Fiat Chrysler saw a 39% slump, and Ford sales were down nearly 34%.
Then there’s Tesla.
Elon Musk’s electric automaker reported 20,000 more deliveries than Wall Street expected for the three-month period that saw its factory shuttered for two of those months, it said Thursday, helping its market value climb to an even more commanding lead over the global industry. It could be the moment Tesla’s been waiting for.
After reporting a sales increase of 40.3% during a rocky Q1 for other automakers, the company weathered Q2 better than most while also overtaking Toyota as the world’s most valuable carmaker this week.
Aided by its higher price point and luxury appeal — its cheapest car starts at $37,990 — Tesla hasn’t been hit with the same demand glut that’s rocked other automakers as major economies have plunged into a recession. And with a fully operational China factory under its belt to insulate from US consumer softness, some Wall Street analysts believe there could be a complete paradigm shift afoot.
“We continue to believe EV demand in China is starting to accelerate with Tesla competing with a number of domestic and international competitors for market share with Giga 3 remaining the linchpin of success which remains the prize that Musk and Tesla are laser focused on capturing,” Dan Ives, an analyst at Wedbush, said in a note to clients. His price target of $2,000 for Tesla is the highest on Wall Street.
“To this point, strong Model 3 demand out of China remains a ray of shining light (and we believe was a clear standout in 2Q) for Tesla in a dark global macro and appears to be on a run rate to hit 100k unit deliveries in the first year out of the gates for Giga 3 which is driving some strength for Tesla as well as Model Y deliveries starting to ramp as well,” Ives continued.
Tesla’s success with the retail market could also be what saves traditional automakers in the long run. Truck sales, long a stalwart segment for the US market, continue to shine — especially good news for Ford as it launches a new F-150.
“The fact that retail sales — not fleet — are what kept the market propped up speaks volumes to the resilience of the American consumer,” Jessica Caldwell, head of insights at Edmunds, an auto-industry research firm, said. “And the way that dealers were quick to pivot to online sales also underscores the incredibly responsive and resourceful nature of the industry in the face of adversity.”
June auto-sales data from private firm Autodata show a modest recovery beginning, with 13.15 million cars sold in the month compared to May’s 12.17 million. Prices for used cars have also rebounded quicker than many insiders had expected anther positive sign as the industry grapples with an influx of marketing incentives to move record inventory levels off of sales lots.
But everything hinges on an economic recovery that’s anything but certain.
The US unemployment rate continued to decline in June, sinking to 11% in a surprise to economists, and that helped stocks continue their rebound. At the same time, however, the country appears to be losing its grip on the pandemic. The US hit 50,000 daily coronavirus cases for the first time this week, as infections surge with mere weeks left in economic-relief programs that end in July.
UBS analysts say that their worst-case scenario, in which global auto production falls 17% this year, “is not yet fully discounted as cascading effects (need for recapitalization) would also need to be taken into account.”
But for Tesla, things seem alright — and the market has been quick to reward it.