Tesla’s China plant might have come to the carmaker’s rescue last quarter
- The electric car giant may have delivered more than 83,000 vehicles in the second quarter, helped by its new Gigafactory in Shanghai
- Tesla chief executive Elon Musk suggested to the company’s employees that the carmaker could manage to avoid a quarterly loss
Tesla endured a roughly seven-week shutdown of its most important electric car plant in the world in the second quarter, but its brand-new backup factory may have saved the day.
Expectations were much lower just a few months ago, when Tesla and its car industry peers shut factories and showrooms and watched their stock prices crater. But while other car manufacturers’ shares have come back slowly, Tesla’s have soared, closing on Tuesday at a record high of US$1,079.81.
What is helping Tesla’s cause is its new plant in Shanghai, which started delivering electric vehicles to public customers in January. The carmaker also began production of the Model Y crossover in March and rushed to reopen its Fremont, California, factory in May so that it could resume filling orders for what chief executive Elon Musk has predicted will become the company’s top seller.
“The lesson learned by now is that TSLA shares tend to ‘work’ when something new has launched,” Jeffrey Osborne, a Cowen analyst with the equivalent of a sell rating on the stock, said in a report on Tuesday. “At this point both the Model Y and China-built cars are ramping up.”
Musk, 49, suggested to Tesla employees early this week that the company could manage to avoid a quarterly loss.
“Breaking even is looking super tight,” Musk wrote to staff in an e-mail seen by Bloomberg. “Really makes a difference for every car you build and deliver. Please go all out to ensure victory!”
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Tesla starts delivery of made-in-China cars
Musk has sent many end-of-quarter internal memos both to rally employees and signal to investors, but his optimism has sometimes been misplaced. The then-record 97,000 deliveries Tesla reported for the three months that ended in September fell short of the 100,000 mark he floated in an e-mail to workers.
This quarter, though, even sceptics in the analyst community see reason to be upbeat.
“With strong production in China and better-than-expected production in Fremont, we think that Tesla will beat what appears to be a low bar for deliveries,” Brian Johnson, a Barclays analyst with a sell-equivalent rating on the stock, wrote in a report.
He estimates 85,000 electric vehicle deliveries, potentially setting Tesla up for a quarterly profit that would make the stock eligible for inclusion in the S&P 500 Index. Johnson still believes the carmaker’s shares are “fundamentally overvalued”, but believes they could keep moving higher in the coming weeks.
“We urge our bearish friends (perhaps emboldened by a ~US$1,000 stock price) to return to the shelter of their caves,” Johnson wrote.
