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Tesla is poised to survive 2020’s worst economic shocks; other automakers, not so much

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Just before being proven wrong by Tesla’s first-quarter delivery and production numbers, TSLA bears were hard at work, spreading the now-aging narrative that the company’s electric cars will soon see a drop in demand. Hours before Tesla released its numbers, short-seller Jim Chanos even remarked that he remains “maximum short TSLA,” arguing that the company stands to lose money this year. 

What the noted short-seller failed to mention was that this year would likely be downright brutal on the entire auto industry. 2020 only started, but the onset of the coronavirus pandemic has given the whole car market an economic shock that will resonate for a substantial period of time. Tesla will see adverse effects, most likely in the second quarter, but compared to the rest of the industry, the electric car maker may very well be poised to be a company that can not only survive, but thrive in these times of crisis. The same cannot be said for legacy carmakers, or the scheduled “Tesla Killers” that are set to be released in the near future.

Gene Munster of Loup Ventures noted that Tesla’s Q1 production and delivery results show that Tesla is winning despite the current headwinds simply because it has a product that is measurably better than both gas and electric competitors. The Wall Street veteran further added that while the next quarters will be challenging for Tesla and all other automakers like BMW and General Motors, he still expects Tesla to continue reporting 15-25% better delivery results compared to its peers. 

Tesla Model Y at Fremont factory parking lot
Tesla Model Y at Fremont factory parking lot (Credit: Wilson Lam via Twitter)

A lot of this is due to the company’s products, specifically the Model 3 sedan and the Model Y crossover. Both vehicles are high-volume EVs, and they are designed to disrupt their respective segments. The Model Y, in particular, is designed to be competitive in the crossover market, which happens to be one of the fastest-growing segments in the auto industry today. Munster argued that over time, the price and performance gap between Tesla and its competitors would likely get broader. This is because rivals, such as legacy automakers and their respective EVs, will either have to sell a vehicle that’s at parity with Tesla’s features and range but at a higher price, or a car whose cost is subsidized by the company, resulting in financial strain. For automakers, such is a notable dilemma. 

Tesla investor @Incentives101, an economist with a background in macro research, stated in a message to Teslarati that the demand for the electric car maker’s vehicles will largely depend on how distinct they are from other EVs on the market. It’s quite difficult to analyze a product’s demand from a consumer preferences standpoint. In the case of apparel, for example, it is challenging to determine why some consumers prefer Adidas over Nike. The auto industry is quite the same. When one looks at the demand for vehicles, it is difficult to pinpoint why some consumers buy a BMW 3-Series over an Audi A4, or a Mercedes-Benz C-Class; or why some customers buy a Honda Accord instead of a Toyota Camry. 

Explaining further, the economist noted that instances such as these usually mean that the products consumers are purchasing are almost perfect substitutes for each other. If one were to study the size, efficiency, performance, and price of any category of cars, one would see that the differences are usually so marginal between each option and segment that consumer decisions often fall on subjective variables such as looks or brand loyalty. This is something that veteran automakers such as Ford rely on, with the company being proud of F-150 owners sticking with the company for years, or at times, even generations. 

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(Photo: fromwhereicharge/Instagram)

In the auto sector, there are various tradeoffs that customers are likely to compromise with. For buyers of cars with an internal combustion engine, opting for a low price will likely sacrifice performance, as is the case with the Toyota Camry. Buyers of electric vehicles from traditional automakers, on the other hand, will probably sacrifice something vital such as range for performance, as is the case with the Porsche Taycan. Tesla’s electric vehicles have pretty much eliminated these tradeoffs over time, largely thanks to the company’s own experience in producing and designing electric vehicles and their unique vertical integration, which provides the company unprecedented control over their products and the way they function. 

Amidst the coronavirus pandemic, the health and economic shock that the world is facing are unprecedented. These shocks affect everyone, and for automakers, it will all come down to whoever can recover the fastest. Veteran automakers are fighting at a disadvantage as Tesla extends its gap in performance and tech. Tesla, on the other hand, may very well be poised to hit the ground running and crush its competitors in the process. The Model 3 and Tesla’s first-quarter results highlighted how demand for the company’s vehicles would likely be steady. As for demand concerns about Tesla, the economist noted that such concerns remain overblown. 

“Until today, demand concerns about Tesla vehicles are overblown and based on a poor understanding of economics. Demand is a function of consumer preferences, basically what consumers value. It is also a function of income, price of substitutes, and few other things. How much each of these variables affects demand is not static. It may be that consumer preferences don’t change but income does, so in a scenario of rapid economic downturn with relatively fast recovery demand for Tesla would behave the same,” the economist wrote. 

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.

Simon is an experienced automotive reporter with a passion for electric cars and clean energy. Fascinated by the world envisioned by Elon Musk, he hopes to make it to Mars (at least as a tourist) someday. For stories or tips--or even to just say a simple hello--send a message to his email, simon@teslarati.com or his handle on X, @ResidentSponge.

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Investor's Corner

Tesla Board member and Airbnb co-founder loads up on TSLA ahead of robotaxi launch

Tesla CEO Elon Musk gave a nod of appreciation for the Tesla Board member’s purchase.

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(Credit: Tesla)

Tesla Board member and Airbnb Co-Founder Joe Gebbia has loaded up on TSLA stock (NASDAQ:TSLA). The Board member’s purchase comes just over a month before Tesla is expected to launch an initial robotaxi service in Austin, Texas.

Tesla CEO Elon Musk gave a nod of appreciation for the Tesla Board member in a post on social media.

The TSLA Purchase

As could be seen in a Form 4 submitted to the United States Securities and Exchange Commission (SEC) on Monday, Gebbia purchased about $1.02 million worth of TSLA stock. This was comprised of 4,000 TSLA shares at an average price of $256.308 per share.

Interestingly enough, Gebbia’s purchase represents the first time an insider has purchased TSLA stock in about five years. CEO Elon Musk, in response to a post on social media platform X about the Tesla Board member’s TSLA purchase, gave a nod of appreciation for Gebbia. “Joe rocks,” Musk wrote in his post on X.

Gebbia has served on Tesla’s Board as an independent director since 2022, and he is also a known friend of Elon Musk. He even joined the Trump Administration’s Department of Government Efficiency (DOGE) to help the government optimize its processes.

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Just a Few Weeks Before Robotaxi

The timing of Gebbia’s TSLA stock purchase is quite interesting as the company is expected to launch a dedicated roboatxi service this June in Austin. A recent report from Insider, citing sources reportedly familiar with the matter, claimed that Tesla currently has 300 test operators driving robotaxis around Austin city streets. The publication’s sources also noted that Tesla has an internal deadline of June 1 for the robotaxi service’s rollout, but even a launch near the end of the month would be impressive.

During the Q1 2025 earnings call, Elon Musk explained that the robotaxi service that would be launched in June will feature autonomous rides in Model Y units. He also noted that the robotaxi service would see an expansion to other cities by the end of 2025. “The Teslas that will be fully autonomous in June in Austin are probably Model Ys. So, that is currently on track to be able to do paid rides fully autonomously in Austin in June and then to be in many other cities in the US by the end of this year,” Musk stated. 

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Investor's Corner

Tesla hints at ‘Model 2’ & next-gen EV designs

Tesla’s Q1 2025 update confirms new models this year, with production tied to existing factory lines. Could it be time for the Model 2 debut?

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(Credit: Tesla)

During its Q1 2025 earnings call, Tesla executives hinted at the much-rumored “Model 2” and other next-gen EV designs.

Tesla slightly addressed whether or not it will be pushing forward with the debut of new models later this year in its latest earnings call. The company’s product development executive, Lars Moravy, shared some details about Tesla’s design process and the upcoming affordable models.

“We’re still planning to release models this year. As with all launches, we’re working through, like, the last minute issues that pop up. We’re knocking them down one by one. At this point, I would say that the ramp might be a little slower than we had hoped initially…But there’s nothing that’s blocking us from starting production within the next, within the timeline laid out in the opening remarks.

“And I will say it’s important to emphasize that, as we’ve said all along, the full utilization of our factories is the primary goal for these new products. And so the flexibility of what we can do within the form factor and, you know, the design of it is really limited to what we can do on our existing lines rather than building new ones. But we’ve been targeting the low cost of ownership. Monthly payment is the biggest differentiator for our vehicles, and that’s why we’re focused on bringing these new models with the, you know, the lowest price, to the market, within the constraints I just highlighted.”

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In January, Tesla’s Chief Financial Officer Vaibhav Taneja teased several new product introductions for this year. There is at least one product that most Tesla supporters and investors are hoping to see: the company’s affordable vehicles, which have been dubbed by the EV community as the “Model 2” or “Model Q.”

Before Tesla’s Robotaxi event last year, many speculated that the company would also unveil its affordable next-gen vehicle. Gene Munster from Deepwater had expected Tesla to release a stripped-down version of the Model 3 as its affordable vehicle during the Robotaxi event. In the end, Tesla unveiled its Robotaxi vehicle and its Robovan design.

It’s been a while since the Robotaxi event, and Tesla has kept mum about its affordable vehicle. Considering its Q1 2025 performance, TSLA investors look forward to catalysts that could boost the stock.

The “Model 2” has been labeled a potential catalyst for Tesla. As such, TSLA investors and supporters have been itching for news about the new affordable vehicle. The main questions surrounding the “Model 2” revolve around its design and price. Based on Moravy’s statement, the “Model 2’s” design will heavily depend on Tesla’s current assembly lines and supply chain structures.

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Tesla regains Piper Sandler’s confidence with Robotaxi plans & Q1 Results

Piper Sandler says Tesla delivered the best-case scenario for bulls. $TSLA has catalysts ahead to silence the bears.

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tesla-model-y-delivery
(Credit: Tesla)

Tesla gained Piper Sandler analyst Alexander Potter’s confidence following its Q1 2025 earnings call. Piper Sandler reaffirmed its Overweight rating and $400 TSLA price target, signaling optimism for the company’s robotaxi and affordable vehicle launches expected this year. The firm’s stance reflects Tesla’s resilience amid market challenges.

Despite expectations of weak Q1 financials, Tesla’s stock edged up in after-hours trading, defying skepticism. Piper Sandler’s Alexander Potter noted that the results met the hopes of Tesla supporters, particularly as the company held firm on its timelines. Potter emphasized that anticipation for robotaxi details and new vehicle launches should keep critics at bay, supporting the $400 target.

“In our preview last week, we predicted that (at best) Q1 would be a non-event. With the stock trading up slightly in the after-hours session, it appears our best-case scenario has materialized. Considering generally weak Q1 financials, we think this is the best result that TSLA bulls could’ve reasonably hoped for.

“In our view, the most important Q1 takeaway is this: Tesla didn’t hedge expectations re: launching Robotaxis or lower-priced vehicles in 1H25. With <2 months until the end of June, investors can look forward to some interesting catalysts in the weeks ahead. In our view, this alone should be enough to keep the bears at bay, at least until we have a better idea re: the details of Tesla’s new products, as well as the scale/scope of the Robotaxi launch,” wrote Potter.

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Wedbush Securities’ Dan Ives, a longtime TSLA bull, echoed Potter’s optimism for Tesla. Ives raised his price target for Tesla stock from $315 to $350 with a BUY rating. His Tesla upgrade came after Elon Musk’s announcement during the Q1 earnings call that he would reduce his involvement with DOGE, signaling a sharper focus on Tesla.

Tesla’s steady Q1 performance and unwavering commitment to its 2025 roadmap, including the Robotaxi launch and lower-priced models, bolster investor confidence. Piper Sandler’s analysis underscores Tesla’s ability to navigate a competitive electric vehicle market while advancing its technological edge. The upcoming Robotaxi launch and affordable vehicle introductions are pivotal, with analysts expecting these initiatives to drive stock value through 2025.

As Tesla prepares for these milestones, its stock movement reflects market trust in Musk’s vision. With Piper Sandler and Wedbush reaffirming bullish outlooks, Tesla’s strategic moves will remain under close scrutiny, positioning the company to capitalize on its innovation pipeline in a dynamic industry landscape.

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