The Future Of Car Sales Favors Tesla

Automakers around the world are slowly starting to restart production. But even if they can ramp up production, the selling environment will likely look a lot different post-COVID-19. This trend favors a company like Tesla. 

Earnings Recap

Tesla Motors Inc TSLA plans to reopen part of its Freemont production facility on Friday, the first step in what Elon Musk hopes will be a full resumption of business.

The company is coming off a surprisingly strong earnings report, in which they reported a GAAP profit of $16 million on revenues of $5.99 billion, resulting in earnings per share of $1.24.

But it wasn't all good news, as Tesla also recorded a negative free cash flow of $895 million, which makes its goal of being free cash flow positive for 2020 a bit more challenging. As for all U.S. automakers, it remains uncertain how quickly its U.S. plant and suppliers can ramp up due to COVID-19 restrictions. Therefore, near-term profit guidance is “currently on hold,” as Tesla still hopes it will be able to achieve its first full year of profitability.

Despite Musk initially dismissing the coronavirus concerns, COVID-19 forced Tesla to pause both its auto and solar energy segments, impacts of which will likely be fully seen on the balance sheet of the second quarter. The company has already implemented furloughs and pay cuts and ceased all but essential contractors and temporary assignments. But Tesla still continued to sell cars online and deliver them to customers with a contactless delivery option throughout the U.S. That puts them at a distinct advantage, despite the fact that their European counterparts may beat them to the reopening punch.

Competitors forced to a new normal – a digital one

Carmakers have been hit by supply chain disruptions, plant shutdowns, and a lack of state support in emerging markets. The outbreak is forcing them to a new normal and a new strategy when it comes to sales and contactless delivery. German carmakers BMW BMWYY, Mercedes, owned by Daimler AG DDAIF, Volkswagen AG VWAGY and Japanese Honda Motor Co HMC have launched online operations to push sales even in the post-COVID-19 era. 
Meanwhile, Peugeot PUGOY is getting ready to gradually restart activity with French sites gradually re-starting from May 11. And with the virus seemingly under better control in Germany, it shouldn't be long before the German automakers are back to producing cars.

In Michigan, Gov. Gretchen Whitmer has cleared the way for the Big Three automakers to reopen their plants, with May 18 set as a tentative date. 

Outlook

UK car sales plunged 97% in April to the lowest level since 1946, so there's really nowhere for car sales to go but up. In the U.S., Apri auto sales hit their lowest point since 1980, according to AutoData. So the good news is there's really nowhere to go but up. But car companies being forced to move to an online salesforce, it will take a long time for the traditional carmakers to catch up to Tesla's head start. 

This article is not a press release and is contributed by Ivana Popovic who is a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure. Ivana Popovic does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you’re interested in becoming an IAM journalist contact: contributors@iamnewswire.com Questions about this release can be sent to ivana@iamnewswire.com

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