Elon Musk may well be battening down the hatches at Tesla while the Covid-19 pandemic forces the closure of key manufacturing plants, or Gigafactories, and the company imposes a hefty pay cut for senior executives and stand-downs, known as furloughs in the US, for employees that can’t work from home.
But the stock market and leading analysts has judged that the problems facing Tesla are minimal compared to those of the huge legacy car-makers, or Big Auto, that are struggling to keep pace with the transition to electric vehicles.
In the last few trading sessions, Tesla stock has surged more than 60 per cent, and leaped 10 per cent in Tuesday’s after-market alone, taking its market capitalisation to more than $130 billion ($A202 billion), while those of  GM, Ford and Fiat Chrysler have trodden water at best. Tesla is now worth more than all three combined, even though it produces a fraction of their volume.
Why this surge?
Analysts say it is because Tesla already has a big start over its rivals, and the market is just starting to appreciate the importance of this as the efforts by legacy car makers to try and recoup lost ground are hamstrung by their lack of cash.
According to Barrons, one of the most skeptical Tesla analysts, Credit Suisse’s Dan Levy, has noted that Tesla rivals face what he describes as a “two-clock” situation. They need to transition, to keep up with the technology shift and new fuel efficiency requirements in Europe and the US, but now they need to do it while their earnings and cash flow dry up in a recession.
“Tesla is only working on one clock,” Barrons quotes Levy as saying. “It is solely focused on electrification and doesn’t have the dilemma of balancing a transition.”
This is a similar theme to that taken up by Morgan Stanley analyst Adam Jonas, who expects costly EV transition programs and rollouts at Big Auto to be delayed by the impact of the Covid-19 pandemic. Even EV start-up Rivian has been forced to delay the release of its electric utes and trucks, according to one report.
“The further along other competitive EV programs get pushed out, the more Tesla will, in our view, be able to extend its competitive edge in electrification from the perspective of the consumer,” Jonas writes.
Jonas also notes that when it comes to trimming budgets, that is more likely to happen in the “automated vehicle” R&D, the so-called “moonshots”, which is also likely to play in the hands of Tesla.
“Either way, we believe this situation overall favors Tesla in the medium term as there would be less competition from higher quality electric vehicles and the disruption could inadvertently help sustain Tesla’s premium multiple on the AV front as well,” he writes.
“We note that Elon Musk this past week stated on Twitter that Tesla plans to potentially increase the price of Full Self Driving on their vehicles July 1st, which to us shows a great level of confidence in Tesla’s technological expertise and competitiveness.”
Another report from Morgan Stanley also highlights the pace of transition that the big auto-makers are required to maintain. According to its data, the big car makers need to sell 6-8% battery electric vehicles in Europe and 6% in China by 2020-21 to meet existing CO2 targets and NEV credits. That’s equivalent to 2.5 million units.
But the share of EVs globally remains low – in February it was just 2.7 per cent – and this will have to accelerate in the second half of 2020 as EU and China regulatory mandates impact.
Giles Parkinson is founder and editor of The Driven, and also edits and founded the Renew Economy and One Step Off The Grid web sites. He has been a journalist for nearly 40 years, is a former business and deputy editor of the Australian Financial Review, and owns a Tesla Model 3.