Tesla delivers best ever 1st quarter electric car sales, despite Covid-19

Tesla stock soared 17% in after hours trading on Friday morning (Australia time) following the release of recorder first quarter deliveries for Q1 2020 on Thursday night (US time).

Tesla said more than 88,000 electric vehicles in total were delivered in the first quarter, 76,200 of which were Model 3 sedans and Model Y crossovers, with the remaining 12,200 made up by Tesla’s premium Model S sedan and Model X SUV.

Almost 103,000 units were produced, made up by 87,282 Model 3s and Model Ys, which the EV maker had commenced producing in January and started delivering in mid-March.

“This is our best ever first quarter performance,” the company said in its press release.

Year-on-year its deliveries have been growing 40%, compared with a 35% decrease for the overall US auto market, analyst for disruptive investment firm Ark Invest, Sam Korus noted on Twitter.

Delivery numbers – counted as a sale by Tesla – were just shy of Wall Street analyst expectations of 89,000 according to a survey by Factset, Market Watch reports.

Although the delivery numbers seem off base for Tesla’s guidance that it would “comfortably exceed” 500,000 units delivered in 2020, the company has not withdrawn its guidance.

At the time, Tesla expected there would be some impact on first quarter production and sales, in part due to traditionally slow starts to the year for the auto industry at large, but also due to a forced temporary closure of its newly opened Shanghai Gigafactory 2 to assist in curtailing the spread of the novel Coronavirus in China.

Tesla CFO Zachary Kirkhorn said during the company’s 2019 fourth quarter call, “For Q1, please keep in mind that the industry is always impacted by seasonality.”

“We may be temporarily impacted by the coronavirus. At this point, we’re expecting a one to a one-and-a-half week delay in the ramp of Shanghai built Model 3 due to a government required factory shutdown.”

With the announcement of its 1 millionth vehicle made – a Model Y – on March 10, Credit Suisse analyst Dan Levy estimated production for the quarter would exceed 100,000.

“Elon Musk noted on March 10 that Tesla had produced its millionth vehicle. This likely implies that by 3/10 Tesla had produced ~85k units in the quarter, with a weekly production pace in Fremont of ~7,600-7,800 units/week,” Levy was quoted as saying by CNBC.

In fact it beat that with 103,000 vehicles produced, despite announcing on March 19 that it would shutdown the Fremont factory.

With the US  now bearing the major brunt of the Covid-19 impacts with almost a quarter of all 1 million cases worldwide according to John Hopkins University, the impact may be greater for the wider auto industry than originally thought.

But it seems Tesla may buck that trend.

Tesla’s early 2020 rally on the opening of the Shanghai factory and positive news in the form of a Q4 2020 profit and Model Y ramp hit a high of $US968.99 in February.

Drops in share value due to the Covid-19 pandemic felt across industries saw Tesla’s stocks drop to a low of $US361.22 on March 18, and while some gains were subsequently made after the company announced it would continue with “touchless” deliveries as it shut down Fremont, some analysts remained cautious.

According to The Street, Morgan Stanley’s Adam Jonas said that some investors doubted Tesla would achieve 80,000 deliveries, and although the EV maker has in fact met his own estimate of 88,000 he noted that Tesla’s typical end-of-quarter ramp up of deliveries would be disrupted.

“Tesla typically delivers a disproportionate share of its quarter’s units in the last two weeks of the quarter,” he said, according to Barron’s.

CNBC notes that JMP Securities’ Joseph Osha, who revised his price target on Tuesday from $US1,060 to $US840 now predicts annual deliveries will be 433,000 for 2020 but also believes Tesla will rebound in 2021.

“Obviously, much has changed for TSLA recently, and with that in mind we revise our model to reflect lower production and delivery activity for 2020,” he was quoted as saying in a note by CNBC on Tuesday.

One of the most cautious investors, Loup Ventures’ Gene Munster, who revised delivery estimates to just 57,000, sees the current situation in a more positive light, expecting that despite the shutdown which now also affects its Fremont Gigafactory where the Model 3 and Model Y are made, Tesla will still keep ahead of the legacy car maker pack.

“We see anything above 57k (our bottom-up math) as a directional positive,” Munster was quoted as saying by CNBC.

“The Street is at 79.9k after adjusting for the impact of the shutdown. The most important benchmark will be Tesla’s sequential decline in deliveries vs. the broader auto industry, which we won’t have data on for another month. We believe, even with the shutdown, Tesla will continue to outpace the broader auto industry growth rate by 25-30%.”

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