Tesla Seems Immune to Coronavirus’ Blow to Automobile Sales—But Is It?

Tesla''s recent China numbers suggest that it might see a strong rebound when the U.S. economy reopens.

Tesla’s China sales in March jumped 450 percent from a year ago, signifying that it could see a similar rebound in the U.S. when economy reopens. Karol Serewis/SOPA Images/LightRocket via Getty Images

The coronavirus has put a halt on everything that moves, from airplanes to cruise ships and inevitably to the everyday necessity that is automobiles.

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Due to the impact of widespread quarantine, 2020 global auto sales are set to tumble 22 percent from last year to only about 70 million units, market intelligence provider IHS Markit said on Tuesday, revising its previous forecast of a 12 percent global sales setback just a month ago.

SEE ALSO: Even Tesla Can’t Afford to Pay Rent Due to COVID-19 Blow

IHS predicted that the global decline would be led by a 26.6 percent fall in the U.S. to 12.5 million units. If true, that would be the lowest domestic auto sales level since 2010.

“The unexpected and sudden nature of the impacts of the pandemic are hitting the autos sector hard, with unprecedented levels of uncertainty around prospects for meaningful global recovery,” Colin Couchman, IHS Markit’s head of global autos demand forecasting, told CNBC.

That said, what seems to be a systematic shock might eventually blow over for the electric vehicle sector, or at least the cult of Tesla (TSLA).

Last week, LMC Automotive data showed that Tesla’s March unit delivery in China, which recently came out of a nationwide coronavirus shutdown, jumped 450 percent from a year ago despite a 43.4 percent plunge of overall auto sales in the country—a strong signal that the electric carmaker may see a similar rebound at home when the economy reopens. 

“Although Tesla is not completely insulated from the downturn, I do believe that their situation is unique and they will be able to sell everything they make,” David Williams, president of Health Business Group, a management consulting firm, told Observer. Last week, Williams placed an order for a Tesla Model Y, “even though I don’t know when it will arrive or what the economy will be like at that time,” he said. “It’s a combination of wanting something fun and innovative and wanting to reduce my carbon footprint. I think my situation is typical of Tesla customers.”

Earlier this month, Tesla posted record-high and better-than-expected delivery figures for the first quarter, despite the coronavirus’ impact in China during the period. However, bearish investors say quarterly delivery numbers may not be a fair representation of Tesla’s true business situation.

“Tesla tried to paint it as its best ever Q1, but that conceals important information,” John Engle, president of Almington Capital Merchant Bankers, a private investment firm with diversified exposure, told Observer.

“In Q1 2019, Tesla was not producing for the international market, nor did it have an operating factory in China. So delivering more cars in Q1 2020 is hardly a fair comparison,” Engle explained. “In Q1, deliveries were actually down 23 percent sequentially from Q4 2019. That is a dangerous sign for a company with a stock price with massive growth baked in.”

Tesla shares are currently trading at $680, more than twice the price level just a year ago. The stock is up 60 percent since the beginning of 2020, while S&P 500 is down 15 percent.

Tesla Seems Immune to Coronavirus’ Blow to Automobile Sales—But Is It?