Tesla Will Extend Leading Advantages Vs Legacy Automakers Even In Recession

Tesla Will Extend Leading Advantages Vs Legacy Automakers Even In Recession

The outbreak of COVID-19 negatively affected the economic situation in the world and the automotive industry was no exception. Car manufacturers suffer losses in connection with this situation, but this does not apply to Tesla. Despite a slight decrease in demand, consumer interest in the company's electric vehicles remains at a high level.

The first quarter of 2020 was good for Tesla. The recession caused by the coronavirus pandemic is likely to help the company, Baird analyst Ben Kallo said today. Tesla’s advantage in electric cars outperforms major car markers or original equipment manufacturers (OEMs) who may be forced to delay their own electrical initiatives. 

Source: Bloomberg

According to MarketWatch, Kallo reiterated his neutral rating on Tesla stock in a note discussing the timeline for production to restart at Telsa's plant in Fremont, California. "We will look for updated commentary on a timeline for restarting production, but do think the company is positioned to manage ~ 2 quarters of downtime," said the note.

Kallo estimates Tesla's cash burn for the first quarter at about $ 400 million, after it produced about 14.3K more cars than it delivered; the corresponding inventory build could be an overhang, he wrote. "All else equal, we think the inventory build alone could be a ~ $ 500M headwind (inventory valued at the lower of cost and net realizable value)," he wrote. "That said, the inventory build will likely enable TSLA to continue delivering cars despite production downtime in Q2, which we view favorably."

About the Author

Eva Fox

Eva Fox

Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.

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