The pandemic barely slows down the world’s most valuable auto company. But quality problems and a second corona wave threaten success.
Two days before the end of the quarter, Tesla boss Elon Musk cheered on his employees again: In an email with the subject line “It depends on the last days”, he wrote to all employees on Monday. “Breaking even is looking super tight. Really makes a difference for every car you build and deliver. Please go all out to ensure victory!,” said the two-line email.
The victory may Tesla now celebrate for now. The car maker from Silicon Valley announced surprisingly good delivery figures on Thursday. The stock jumped more than eight percent and held gains throughout the day.
Tesla delivered 90,650 cars between April and June, with around 80,000 models 3 and Y, 10,000 models S and X. That was only five percent less than in the same quarter of 2019 and far more than the average forecast by analysts who only had expected 72,000 Tesla vehicles delivered.
The second quarter of 2020 was the first in which the pandemic paralyzed public life in most countries around the world, frozen large parts of the economy and millions of people lost their jobs.
“After our main plant in Fremont was closed for most of the quarter, we successfully brought production back to pre-level,” the company said. Musk, who had been playing down the seriousness of the pandemic for months, called the corona curfew “fascist” in April and reopened his work in mid-May – a few days before it was officially allowed.
Tesla becomes the most valuable car company
Tesla’s Gigafactory in Shanghai is likely to have made a major contribution to the delivery success. The plant, which opened in October 2019, produces the relatively inexpensive Model 3, with which Tesla achieves its highest numbers. Because China suffered its Covid-19 epidemic earlier than the United States, the two-week shutdown of Tesla’s Shanghai plant fell into the first quarter and no longer dragged current delivery figures down.
Traditional car companies, on the other hand, felt the corona crisis much more violently than Tesla: sales at General Motors dropped by more than a third, and VW and BMW also suffered.
In the meantime, Tesla has left them all behind on the stock exchange. In mid-June, the electric pioneer passed Toyota for the first time to become the most valuable car company. Tesla’s market value is more than $220 billion.
Since Musk’s mail on June 29, the Tesla rate has increased by more than 20 percent. The lead over the rest of the industry is growing – even though Toyota sells around 30 times as many cars in an average quarter.
In any case, Tesla’s rating cannot be explained with classic key figures: With annual sales of $24.6 billion in 2019 and a small loss, Tesla – as of today – is more in a league with Opel than with Toyota or the Volkswagen Group.
But Tesla is seen as the future of the industry in the key disciplines: the design of the cars, the intuitive software, the driver assistance referred to as “Autopilot” and the range of its batteries – the company founded 17 years ago is considered the leader everywhere.
Tesla wants to present further advances in its batteries
Tesla recently stated that its Model S Long Range Plus could be the first electric car to travel 400 miles (around 640 kilometers) on a single charge. VW promises a maximum range of 550 kilometers for its ID3, the Audi E-Tron and the Porsche Taycan are also behind.
At its “Battery Day” Tesla wants to present further progress of its storage facilities – because of the pandemic, the event has had to be postponed for months, now it is expected to take place in September.
From the point of view of the influential analyst Dan Ives from Wedbush Securities, Tesla’s share is by no means running out of juice: Due to increasing demand for the Model 3 in China, the corona restrictions loosening in Europe and the USA, and battery progress, “Tesla’s share has continued Air upward”. Ives raised the price target from $1250 to $2000. The stock is currently at $1208.
But there are some potholes in front of the electric car manufacturer: the loosening of the corona restrictions is at risk, at least in Tesla’s home state of California. After the opening of shops, cafes and manufacturing industries there again, the number of Covid-19 cases increased rapidly. The largest state in the United States is already beginning to cash in some easing. If Tesla had to close its Fremont plant and headquarters in Palo Alto again, that would be a big setback.
Texas is also badly affected by the second wave of Corona in many parts of the United States – Musk is said to want to build his next plant in Austin, and the Tesla boss and major investor has even brought the company headquarters from California to Texas into play.
Buyers complain about quality problems
And then there are Tesla’s perennial quality problems: According to a study by market research company JD Power, Tesla buyers had more problems with their new cars than any of the other 31 brands tested.
The industry average for 2020 model-year vehicles was 166 problems per 100 vehicles. Tesla had 250 problems per 100 vehicles. The top-rated brands were Dodge and Kia both at 136 problems per 100 vehicles.
The most frequently mentioned shortcomings of Tesla buyers concern the build quality, which has long been a weakness of the car manufacturer: sometimes the bodywork is warped, sometimes the engine rattles, or the paint is applied inaccurately.
As long as Tesla was mainly driven by avant-garde electricians, that wasn’t a big problem. Tesla fans are considered particularly forgiving when it comes to gaps and similar obsessions of the old car industry. But that could quickly be over with the rise to mass production and the most valuable car company in the world.