Tesla’s streak of profits is not derailed by the coronavirus as the auto industry prepares for losses

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(Reuters) – Tesla Inc (TSLA.O) released its third consecutive quarterly profit on Wednesday, but said the new coronavirus was hurting deliveries and lockout restrictions prevented the automaker from providing full-year advice.

FILE PHOTO: People wearing face masks are seen inside a Tesla showroom in a mall in Wuhan, Hubei Province, the epicenter of the Chinese coronavirus disease epidemic ( COVID-19), March 30, 2020. REUTERS / Aly Song

The company’s shares rose more than 8% to $ 870 in extended trading.

Tesla’s report on a profitable quarter comes just a day after its Detroit rival Ford Motor Co (F.N) reported a loss of $ 2 billion in the first quarter and plans to lose an additional $ 5 billion in the quarter due to the demand for a coronavirus pandemic.

Tesla’s results for the current quarter and the rest of the year will be an important test of the company’s sustainability. If Tesla can limit its losses, or even continue its profit streak and outrank legacy automakers, it will be in a better position to take sales from competitors weakened by the disruption of the coronavirus.

Tesla said it could not predict how quickly global vehicle manufacturing and supply chains would normalize, saying it would reverse forecasts for profit and full-year cash flow when it will publish its results for the current quarter in three months.

In January, Tesla said it expects positive quarterly cash flow and positive net profit going forward. The company did not update its half-million vehicle delivery forecast by Wednesday by the end of 2020 on Wednesday.

The COVID-19 pandemic caused by the new coronavirus has disrupted demand for cars, with automakers, including Tesla, forced to lay off workers and shut down factories.

Demand for vehicles in the United States fell 80% in some hard-hit regions in March, but analysts said sales appeared to rebound slightly in the first two weeks of April.

Tesla announced on Wednesday that it plans to ramp up production at its vehicle factories in Fremont, California and Shanghai, China in the second quarter.

The company said operations at its Shanghai plant are progressing better than expected, with production rates for its Model 3 sedan expected to reach 4,000 units a week, or 200,000 a year, by mid-2020.

He said gross margins at his Shanghai plant were approaching those of Model 3 production in the United States. Automotive gross margins in the first quarter jumped to 25.5% overall.

But of the $ 5.1 billion in total auto revenue, almost 7% was due to regulatory credits – the money Tesla receives from other automakers who buy the company’s carbon credits to meet stricter regulations. Revenues from these loans almost tripled compared to the last quarter.

Hargreaves Lansdown analyst Nicholas Hyett also reported that Tesla’s free cash flow was negative in the last quarter and improved only slightly on an annual basis.

“The immediate future doesn’t seem like the perfect time to sell high-priced cars, so it may not come as a surprise surprise,” said Hyett.

Tesla said its free cash flow was affected by increased inventory due to the shutdown of the coronaviruses.

The electrical manufacturer has not said when it plans to resume production at its Fremont plant, which has been inactive since March 24.

Tesla closed the California plant as it ramped up production of its new electric crossover utility vehicle, the Model Y, which is expected to generate record demand and higher profit margins.

Tesla said on Wednesday that model Y is already contributing to profits, marking the first time in company history that a new vehicle is profitable in the first quarter.

Alameda County, where the plant is based, extended home stay orders until May 31 and vehicle manufacturing is not considered a critical business and is exempt.

FILE PHOTO: A Tesla logo on a Model S is photographed inside a Tesla dealership in New York, United States, April 29, 2016. REUTERS / Lucas Jackson

Earlier this month, Tesla said production and deliveries of its Model Y sport utility vehicle were significantly ahead of schedule, as it delivered the most vehicles in the first quarter to date, despite the ‘epidemic.

Excluding items, Tesla reported earnings of $ 1.24 per share. Analysts expected a loss of 36 cents a share.

Tesla shares have risen 91% for the year to date at the close on Wednesday, after recovering from a severe crisis in March.

Reports from Akanksha Rana to Bengaluru and Tina Bellon to New York; Editing by Bernard Orr and Lisa Shumaker

Our standards:Principles of the Thomson Reuters Trust.

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