The secrets of Elon Musk, why is Tesla making money in the coronavirus period?

The Californian manufacturer is the only one to grow in Italy even during the lockdown. All sales and financial data are in contrast with the market. Here are all the answers

Share


In addition to the health problem, the coronavirus emergency is also leading to some important consequences for the economy. One of the sectors most affected by the pandemic is certainly the automotive one. The data are clear: in March, in Europe, there was a drop of 51.8% in sales compared to the same month in 2019 and in Italy the percentage rises to 85.4%. The numbers are worrying even if the period under analysis is widened; in fact, in the first quarter of 2020, car manufacturers in Italy sold 35.5% less cars and the data are similar in almost all European countries. The situation is slightly better, albeit relatively, in the United States where the collapse was around 27% in March alone.

Who is showing growth? Elon Musk.

Among these data, however, there are also some companies that have not slowed down and, indeed, have even managed to grow. We are referring to Tesla. Elon Musk's company, a leader in the production of "premium" electric cars, is going great all over the world, starting from China where the mega-factory in Shanghai has recently been reopened, and Tesla recorded over 12,000 cars sold in March alone, 450% more than in February. And while this was a predictable result, even if not in these quantities, given the enormous contraction of the entire automotive sector in the Far East, it is surprising what is happening in latitudes closer to home. Let us start from Italy where, in March, which will be remembered as the first month of the lockdown, the Tesla Model 3 was the best-selling electric car and also the most registered in the entire "D" segment, including endothermic engine ones. Elon Musk's company also leads the way in the F segment with its Model S and Model X which are in first and third positions.

 

Segment D Market Data (Source: UNRAE)
Segment F Market Data (Source: UNRAE)

Sales of electric cars go up: + 966.6% in a year

These are important data given that in the last year the share of the electric car market in our country has grown by 966.6% from 0.3% to 3.2% of the total registrations. Staying with these values, there has also been a decisive +162.2% as regards hybrids and -18.3% of diesel, while petrol cars are slightly down at -13.8%. On the Italian market, Tesla was the only company to grow (by 57.62%) in March, compared to the previous month, against a global market crash of 85.42%.

 

Italian Domestic Market Data (Source: UNRAE)

Finance, Tesla on an uphill rollercoaster

All this data reflects on the growth of the Tesla brand on the stock exchange and the encouraging upgrades it is receiving from the financial world, from the push from Goldman Sachs to the transition from "underperformer" to "neutral" in Credit Suisse ratings. In the last month, the NASDAQ value of the brand has grown by 104%, while since the beginning of 2020 the financial increase has been 75%. These latest figures, however, are to be contextualized given that in February Tesla had reached one of its highest peaks, only to sink in early March and start a sudden recovery.

 

Tesla's market performance on NASDAQ in the last month (Il Sole 24 Ore)

But what are the reasons for these extraordinary numbers? How does a company like Tesla, which produces cars for a premium segment, not suffer too much (at least so far) from such a massive global crisis in the automotive market? Without any pretence, we have tried to give some answers after talking with Italian representatives of the company.

1) Contactless selling method

 

Tesla has for some months eliminated the sale of its cars in dealerships, taking its entire market online. Buying an Elon Musk car on the website is extremely simple and, even if you select all the options available, it takes a maximum of 5 minutes. The simplicity and minimalism of the versions is disarming, as is the care dedicated to the site itself. Everything, or almost everything, that you can see on Tesla.com will take you to a purchase page, but it will also explain to you in every minimum detail, and with extraordinary immediacy, the characteristics of the car. At this point there is the car’s delivery: Tesla has developed a contactless delivery system by means of an app. The car will be delivered to you at a set point, after which it will be sanitized, and a notification will appear on your smartphone. With that you can open your Tesla via NFC and inside you will find the keys. From that moment, in case the customer is not satisfied, you will have seven days to return the car on condition that you have driven less than 1600km. We were told by the company that, when normal everyday life resumes, test drives might also be contactless, therefore without having direct contact with any operator and not risking spreading the infection.

2) ESG funds, financing for the green market

 

Tesla’s market trend on NASDAQ in the last 3 months (Il Sole 24 Ore)

The world of finance seems very abstract to most people, but it is actually pretty concrete, and the investments made on the market have extremely important implications for everyday life. It is no secret, and a lot of data confirm it, that ESG (Environmental, Social and Governance, or those that reward the most sustainable companies) funds are among the best performing in this period. Among the "green" companies of the moment there is certainly Tesla and it is therefore not wrong to assume that the San Carlos company is also in the portfolio of the investors. Elon Musk has always shown himself to be a great investor but above all an excellent seller, Tesla has been listed on the stock exchange for 15 years and profits have only started to arrive recently, synonymous with the ability of the founder of SpaceX and former CEO of PayPal to keep market attention high on his creations. Another small financial gem, which could explain Tesla's success in this difficult period is its Beta index, which is nothing more than a number that concretizes the company's link with market movements. Tesla's is 0.73, an index that confirms our idea: if the market contracts, it is not mathematical that Tesla loses.

3) Are Dreams Electric? A more responsible world after Covid?

The high performance of ESG stocks certainly stems from the fact that more and more people are becoming aware of the environmental problems of our planet. In the collective imagination, and also in the government's plans for the restart, there is certainly the "green market" which now seems a topic that just cannot be postponed. The mayor of Milan Beppe Sala, head of a Task Force of representatives from the most important cities in the world, has repeatedly reiterated that a net change of direction will have to be made. Tesla was one of the first companies to believe in the dream of a greener world and the company's non-automotive projects are also proof of this, as they come into strong contact with cars as the company takes charge of the Tesla batteries at end of life by converting some components back into the "gears" of its Power-Wall.

4) Sport and speed, Tesla produces dream cars

 

Tesla Roadster

Needless to say, Tesla electric motors, in pure acceleration from 0-100, are almost on par with a Formula 1 and this is certainly a selling plus point of the company for all those who have the opportunity to buy such a car. To find similar figures with an internal combustion engine, you need to go to Bugatti with the Chiron capable of reaching 100km/h from a standing start in just 2.4 seconds (the Tesla Model S ‘loses out’ at just 2.6 seconds). The price difference between the two cars? 3.4 million euro for the Bugatti and the Model S, in its best version, costs "only" 110,000 euro, you do the maths. By the way, we are all anxiously waiting for the commercialization of the Tesla Roadster which with its 10.00 N/m of torque and low weight should outperform the competition. In addition to this, the on-board technology in terms of infotainment and adjustments is better than any type of vehicle in the world.

Sources:

Il Sole 24 Ore

UNRAE (National Union of Foreign Vehicle Representatives)

For the financial analysis we would like to thank Matthias Tozzi

 

Share

Related articles