Tesla Producing Only 50K Cars In Q2?

Tesla (NASDAQ:TSLA) may produce as little as 50K vehicles in Q2 2020 after a strong Q1, which saw the company produce 103k vehicles and deliver ~88k vehicles. Tesla’s Fremont factory, which has an annual production capacity of about 500k vehicles, suspended production in late March due to the Coronavirus crisis. There is a possibility that the factory could have very limited production through this quarter as the pandemic continues to spread in the U.S. On the other hand, Tesla’s Shanghai facility, with an annual production capacity of about 150k units a year, is likely to be key to the company’s production and revenues through the quarter.

Our dashboard analysis Could Tesla Stock Fall 75% From Here? shows how a sharp reduction in guidance figures could see Tesla stock fall off a cliff.

U.S. Production Likely To Be Very Limited In Q2

While Tesla has indicated that it could resume U.S. production in early May, with the company furloughing all hourly workers until May 4, the timeline appears very optimistic. The coronavirus continues to spread in the U.S., and we believe that total COVID-19 cases in the U.S. aren’t likely to peak before early May. Even if the company is able to resume production by mid- to late-May, it will take time to efficiently ramp production back up to full capacity as it may need to work with new norms such as social distancing. Separately, demand is also likely to take a temporary hit, as there is little reason for people to buy cars right now, given the weak economy and limited travel.

Chinese Operations Provide Respite

Tesla’s Shanghai plant with an annual production capacity of about 150k units is likely to be less impacted by the current pandemic, with new infections in China slowing and the government looking to get the economy back on track. Demand in China is likely to hold up better compared to the U.S. over the second quarter. For instance, Tesla delivered 10,160 vehicles in China in March, its highest-ever monthly sales in the country. Moreover, the Chinese government has indicated that it would extend “new energy vehicle” subsidies for two more years. The subsidies should also benefit Tesla buyers, who could receive an RMB 25,000 (~$3,600) subsidy on its vehicles.

Other Related Analysis On Tesla & The Coronavirus

• Coronavirus: Trends Across Key U.S. States
• Tesla Stock Upside: $2,000? 
• Tesla’s value could rise to $1.5 trillion aided by a deal with Google

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