‘I Don’t Know How They Did It’: Tesla Sets Q1 Delivery Record Despite Coronavirus Disaster
Also today on Speed Lines: The “gig economy” poses new challenges for America’s unemployment system.
Welcome back to Speed Lines, The Drive's morning roundup of what matters most in the world of cars and transportation. It's Friday. I don't really know what that means anymore, but I'm going with it anyway.
Tesla Beats The Odds, Again
All week you've read about what an apocalyptic month March was for new car sales, and how April is expected to be even worse. Dealerships everywhere are closed or have scaled back operations, and even if they were open, so many people are facing unemployment, furloughs, pay cuts or general uncertainty over the future that they probably couldn't buy a car even if they wanted to.
There were a few silver linings, like how the U.S. automakers managed to skate by on record-high pickup truck sales—for now. But another American car company pulled out an unexpected victory yet again, and that's Tesla. It's not the company's biggest win ever, but what Tesla did still defied expectations.
The company managed to deliver 88,400 vehicles worldwide through the end of March, which is a new sales record for Q1. Now that's down 21 percent from Q4 of 2019, as Bloomberg reports, but it's still 10,000 cars more than analysts predicted. From the story:
“I’m shocked they did so well,” said Gene Munster, managing partner of venture capital firm Loup Ventures. “I don’t know how they did it. They had every excuse in the world to put out a bad number.”
Tesla tried to salvage as much business as possible last month by introducing “touchless” deliveries at a time when authorities around the globe are urging would-be car buyers to shelter in place.
While Tesla managed to deliver more vehicles than the year-ago quarter, the improvement was small considering the company added a new product -- the Model Y -- and opened an assembly plant in China.
The Model Y is arguably Tesla's most important car ever, as it's an affordable-ish crossover—the hottest-selling vehicle segment in the world right now. Q1 deliveries included Model Y, which went out in mid-March.
Of course, we're really just now starting to feel the effects of the quarantine and its subsequent economic downturn. The second quarter of this year is expected to be abysmal for every automaker with everyone stuck inside or broke, or both. How Tesla will weather that remains to be seen. But I will point you to this Reuters article, which indicates that Tesla finally has amassed a cash stockpile that's stronger than more established rivals—and that may be enough to get it through the hard times ahead:
The company hasn’t just stopped burning cash. Thanks to strong earnings and a surprise $2.3 billion share sale in February, it’s also sitting on almost $9 billion of it. That equates to almost half of the automotive unit’s overall expenses in 2019. A general rule of thumb is that 50% of a carmaker’s costs such as wages are fixed. The rest come from various production needs, which should shrink, if not disappear, when plants are idle. Musk should be able to make that last until March 2021. Ford and GM, by contrast, have enough greenbacks to last around six months.
Who knows. Maybe Tesla will weather this crisis better than most.
Uber, Lyft Drivers Feel The Sting
The U.S. Department of Labor reports that a staggering nine million people have filed for unemployment in just the past two weeks, which should horrify everyone. State unemployment hotlines and offices are so flooded with calls and visits that they can't hope to keep up with demand.
What's worse is that America's unemployment system can't really square with the tech industry trend of treating "gig workers" as contractors instead of actual employees. While they are getting some of the (admittedly paltry) stimulus money, people who drive for Uber and Lyft lack paperwork to prove their income. And they're facing plummeting demand for rides as everyone stays home.
But a week after the bill was signed into law by President Donald Trump, it is still unclear what documentation gig workers, who do not receive wage and tax forms, need to submit to prove their income. This at a time when Uber and Lyft drivers are suffering from a near-total collapse in ride-hailing demand as large parts of the United States shut down to combat the spread of the highly infectious virus.
Gail Nappier, a 63-year-old Lyft driver from Boston, said her income has dropped to around $20 per day, from roughly $180 before the crisis, with only one or two rides per day. She has to worry about her own safety, too.
“I feel like going out and driving is a dangerous game of roulette,” Nappier said. “But there really is no other option right now.”
[...] Drivers voiced frustration over an intransparent and confusing process, saying they spend hours on the phone with state unemployment offices, hoping to find someone to explain their options.
More than a dozen U.S. states contacted by Reuters said they could not provide answers until federal guidelines were published.
As one lawyer in that story argues, this is further proof that Uber and Lyft should've always been considered employers of drivers, not just providers of software.
AutoNation Makes Big Cuts
I told you there's no good news anymore.
As part of the downturn, AutoNation, America's largest car dealership chain, is laying off 7,000 employees and making other significant cuts. From Automotive News:
In addition to putting the 7,000 workers on unpaid leave, the retailer has:
- Postponed more than $50 million of capital expenditures through the second quarter.
- Implemented a temporary 50 percent salary cut for Executive Chairman Mike Jackson and CEO Cheryl Miller. Executive vice presidents will get a 35 percent reduction and senior vice presidents 30 percent. Remaining corporate and regional staff will take a 20 percent hit. Board members waived their retainer fees.
- Reduced second-quarter advertising expenses by about 50 percent.
- Significantly trimmed discretionary spending.
- Frozen new hiring.
The story says new and used vehicle sales have dropped by 50 percent year-over-year. It's really feeling like 2008 and 2009 again, only possibly worse.
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What happens to Tesla in Q2? Can Musk find a way through this?