Tesla reported a modest decline in new-car deliveries for the second quarter, as sales in China and other foreign markets helped the company weather the coronavirus pandemic in the United States.
The company said it delivered 90,650 cars in the quarter, down 5 percent from the 95,365 it sold in the same period in 2019. It sold 88,496 cars in the first quarter of 2020, when most of the company’s operations were largely unaffected by the virus.
Local officials forced Tesla to shut down its main car factory, in Fremont, Calif., in March. Two months later, the company restarted production earlier than it was authorized to do so after its chief executive, Elon Musk, criticized stay-at-home orders as “fascist.”
Analysts said Tesla was able to increase sales in China, where it recently began producing Model 3 sedans at a factory in Shanghai. The new plant allowed Tesla to sell cars in China, the world’s largest market for electric cars, without paying import duties that had limited its sales in that country in the past.
China has also rebounded from its coronavirus outbreak faster than the United States, where auto sales have been slowed significantly by the pandemic. Tesla does not break out U.S. sales, but General Motors and Fiat Chrysler reported on Wednesday that new-vehicle sales in the United States fell by more than a third in the second quarter.
Tesla’s delivery numbers were better than analysts had expected and the company’s stock price was up about 6 percent on Thursday. The company’s stock has soared in recent months, and has been setting new highs this week. At its current price, Tesla has a market value of about $220 billion. That’s more than the value of Toyota Motor, which was previously the world’s most valuable automaker, and three and a half times the combined value of General Motors and Ford Motor.
While traditional automakers sell vastly more cars and earn billions of dollars more in profit than Tesla, Wall Street has grown increasingly optimistic about Tesla’s prospects this year. Some investors consider the company to be at the vanguard of the transition from petroleum-fueled cars and trucks to electric vehicles — a change that they believe older companies like Toyota, G.M. and Ford are ill prepared for.
Tesla has also seemed to overcome problems that had hobbled its ability to bring new cars to market and scale up manufacturing. The company successfully opened a second factory, in Shanghai, and has started building a third, near Berlin. It also started delivering the Model Y, a sport-utility vehicle that is expected to sell well because it starts at about $53,000, which is roughly what comparable luxury gasoline vehicles sell for.
Further, Tesla reported a profit in the first quarter, is generating cash from its operations and appears to have stabilized its financial situation. It ended the first quarter with $8 billion in cash, a dramatic turnaround for a company that had struggled to raise money at favorable terms in 2019.
“If you go back a year and a half, the question was, can these guys make it with the kind of capital expenditures they need to do,” said Joseph Osha, an analyst at JMP Securities. “That’s no longer a question.”
The company is also preparing to accelerate its expansion and is in the early stages of identifying a location for a fourth car factory. Tesla appears to be eyeing a site near Austin, Texas. In a recent county filing, the company said it could begin construction in the third quarter of this year at a 2,100-acre site that is currently occupied by a concrete plant.
Tesla continues to face challenges, however. It still relies on sales of environmental credits to other automakers to generate much of its profit. In a recent email to employees, Mr. Musk said breaking even in the second quarter “is looking super tight.”
Many of Tesla’s customers rave about their cars — and many others pine for the luxury vehicles on social media. But experts have dinged the company for selling cars with obvious flaws and quality problems. Last month Tesla ranked last in a closely watched annual survey of automotive quality by J.D. Power, the first time its cars were included in that report. J.D. Power found customers reported 250 problems for every 100 cars sold, worse than 31 other automakers and well below the industry average of 166.
Further, while sales in China and other overseas markets are holding up, the strength of demand in the critical U.S. market remains unclear, especially as coronavirus cases surge across many states in the West and South, including two big Tesla markets, California and Florida.
In May, when much of California was under stay-at-home orders, Tesla sold just 1,447 vehicles in that state, a drop of 70 percent from a year ago, according to the Dominion Cross-Sell Report.
Tesla is scheduled to report its second quarter earnings later this month.
Niraj Chokshi contributed reporting.
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