Tesla announced its production and delivery results for the first quarter of 2020 this morning. A total of nearly 103,000 vehicles were produced and 88,400 vehicles were delivered during Q1 2020. Despite a 21% decrease in deliveries compared to the previous quarter’s 112,000 vehicles, Tesla has set a new Q1 delivery record, considering the impact of COVID-19 and the economic environment. After seven days of stability, Tesla’s stock price surged nearly 18% after hours, proving that Tesla’s “Nasdaq Bitcoin” aura is still going strong.
The best Q1 in history
During Q1 2020, Tesla produced a total of 102,672 cars, including 15,390 Model S/X and 87,282 Model 3/Y. The company delivered 88,400 cars, including 12,200 Model S/X and 76,200 Model 3/Y.
By comparing the data with the previous quarter, we can observe some interesting points. In Q4 2019, Tesla delivered a total of 112,000 new vehicles, including 19,450 Model S/X and 92,550 Model 3 vehicles, making it Tesla’s highest delivery quarter in history with more than 100,000 vehicles delivered.
The 88,400 vehicles delivered in Q1 2020 was a 21% decrease from Q4 2019, which seems a remarkable drop. However, this doesn’t represent much since Q1 has always been the quarter with the lowest delivery volume for Tesla, especially after the Model 3 began deliveries. This issue also exists with many traditional automakers. The reasons for this include Q1 holidays in various countries and customer consumption habits. It’s not relevant to discuss this further here, but it can be expected that Q1 data will be lower than Q4 data to a certain extent.
When looking at the delivery data from previous Q1s, we can see that the delivery volume this year was the highest ever, with a 40% increase year-over-year.
So, is achieving 88,400 deliveries in Q1 2020 a proud accomplishment?
Tesla’s delivery guidance for 2020 is 500,000 vehicles, a 36% increase from 2019. From the perspective of delivery targets, this growth can not only fulfill the final goal but also exceed the KPI set by Elon.In the context of the global epidemic outbreak, many people may subjectively conclude that Tesla has achieved such high delivery volume, and there will certainly be a greater increase in delivery volume after the slow retreat of the epidemic in Q2.
However, the reality is that the impact of the epidemic on Tesla is more concentrated in Q2, while the impact on Q1 is very limited.
The real impact is in Q2
Firstly, let’s explain why the impact of the epidemic on Q1 is very limited. We divide it into “impact on the domestic market” and “impact on the foreign market”.
Let’s start with the impact on the domestic market.
Since the end of January, the domestic epidemic has entered the outbreak period. Various provinces and cities gradually began to launch level one emergency response, and the people of the whole country began a month-long home life. Most of the production almost came to a standstill, during which Tesla’s Shanghai Super Factory was also forced to shut down for nearly 20 days.
Although the production was somewhat stalled, from the delivery volume point of view, the delivery volume of Model 3 still exceeded 5000 in January and February, which were the two months most severely affected by the epidemic. It became the best-selling high-end car domestically in February, and Tesla’s online sales system and contactless delivery played a critical role here.
We also learned from internal Tesla employees that after production and daily life gradually resumed in March, the delivery volume increased significantly compared to January and February. In their view, the impact of the epidemic on sales was not significant, and the domestic long-endurance Model 3’s entry into the Ministry of Industry and Information Technology’s message had a greater impact on sales.
Now let’s look at the impact of the epidemic on the foreign market.
The global epidemic entered the outbreak period in mid-March, and major global car manufacturers began to reduce or stop production. The Fremont plant, which produces Model S/3/X/Y, officially shut down on March 24th.
From the time perspective, March 24th was only 7 days before the end of Q1, and Tesla’s inventory cycle disclosed in the 2019Q4 financial report was 11 days. Therefore, the impact of the shutdown on delivery volume would not be reflected in Q1’s data.
In addition, Tesla’s data released this time showed that in Q1 2020, Tesla produced a total of 102,672 new cars, which is almost the same as Q4 2019’s 104,891, but deliveries decreased by 21%. So the impact of the epidemic on Q1 production capacity was not significant, only causing some impact in the delivery process.## Tesla Q2’s mainstay: Tesla China factory
As for the other major car manufacturers, the reason for the significant decline in Q1 delivery compared with the same period last year is easy to explain. Q1 is the period most affected by the epidemic in the Chinese market, where the larger the brand’s sales proportion in China, the more obvious the decline.
Looking at the development of the epidemic situation, production and life in China have gradually resumed. However, overseas markets have just begun to be affected. At the end of March, major international car companies successively closed their overseas factories. Before the epidemic was under control, it was unclear when production would resume. The impact on output and sales will gradually become apparent. Therefore, the data for Q2 is more indicative of the impact of the epidemic.
From the production and delivery in Q1, Tesla still has 14,272 new cars that have not been delivered. During the epidemic shutdown period, these 14,000 vehicles in inventory can meet the demand of some users. However, if the epidemic in the United States cannot be effectively controlled and there is no clear timeframe for resumption, Tesla may soon face the situation of no cars available for delivery.
This means that Tesla’s revenue will almost stagnate. For any company, the interruption of cash flow is extremely fatal. Daimler, GM, and Ford have all begun to prepare to use credit lines to ensure sufficient cash flow.
Fortunately, on February 14, when Tesla’s stock price was at a high, Tesla issued 2.65 million shares and raised $2.3 billion in financing. This move, which seemed doubtful at the time, has become an important support for Tesla to withstand the epidemic.
Another important support is Tesla’s Shanghai factory.
Looking at the epidemic areas, it can be found that China has gradually become the least affected country. The Model Y, which should have been showcased in Q2, is now trapped in the epidemic.
For Tesla, the Chinese market is the only market outside the United States that has both demand and production capacity and is the most hopeful market in the next period.
From Jason Yang’s recent live footage, Tesla’s Shanghai factory Phase II has entered the construction phase at full speed.
In conclusion
On February 10, 2020, Tesla’s Shanghai Super Factory became the first factory to resume work after the epidemic. Judging from the current situation of the factory and its supply chain resumption, Tesla’s Shanghai factory’s production capacity has gradually returned to the level before the holiday. Demand is also gradually increasing. In the case of the impressive sales of domestically-made upgraded versions with extended endurance, there is still a significant demand for domestically-made long-endurance models.
Under the epidemic, Tesla is working hard to minimize the impact. The Chinese market has already passed through this difficult phase, while the global market still faces enormous pressure and challenges.The importance of Tesla’s Shanghai factory has reached a new height.
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.