Tesla’s February delivery delay in China faces challenges for 500,000 vehicles this year

The spread of the global epidemic could tighten the supply chain of car companies, and whether that affects the capacity of Tesla’s U.S. plants is a concern. Tesla registered 3,563 new cars in China in January, down 46.36 percent from 6,643 in December, as a result of the Spring Festival and the outbreak of new coronavirus infection pneumonia.

At the same time, Tesla’s superplant in China has been delayed until February 10, which will partly affect the delivery time of the Chinese-made Model 3, which was due to be delivered in February.

Tesla's February delivery delay in China faces challenges for 500,000 vehicles this year

“The delivery of the Shanghai-made Model 3 will be delayed by one to 1.5 weeks,” Said Zach Kirkhorn, Tesla’s chief financial officer, on a conference call for the fourth quarter of the 2019 fiscal year. “It now looks like delivery will be put on hold after the spring, and Tesla will try to make up for it before the outbreak improves,” Said Dowlin, Tesla’s global vice president, on social media. Plans are being developed”. While the former said it had a limited impact on Tesla’s earnings for the quarter, Tesla’s share price has fallen sharply in recent days as the outbreak has affected global investors’ concerns about slowing economic growth, and investment institutions, including Morgan Stanley, have expressed concern about its market outlook.

Outbreaks or impacts on supply chains

As the outbreak spreads, investment agencies are indeed starting to focus on Tesla’s capacity and delivery expectations. Tesla delivered 367,500 vehicles worldwide in 2019 and 42,000 in China. In its 2020 expectations, Tesla has set an annual delivery target of 500,000 vehicles, up about 40 percent from 2019. The confidence behind the expected growth comes from the start-up of its super-factory in China and further expansion of demand.

Since February 10, Tesla’s factory in China has officially resumed work, Tesla’s epidemic prevention liaison, the port of Hong Kong new district management committee of the high-tech industry and science and technology innovation director Sun Wei and said in an interview, the super plant is expected to achieve a production capacity of about 12,000 vehicles per month, the number will gradually rise.

However, industry insiders believe that Tesla’s capacity is still affected by the resumption of work by parts suppliers. “Generally speaking, suppliers have some inventory that can sustain production for a short period of time. But cars are produced on the assembly line, and a shortage of spare parts under the outbreak will drag down overall production capacity, with further impact likely to be felt in March. “An insider at the car company said in an interview. At the same time, the global spread of the outbreak will also cause a tightening of the supply chain of car companies, and whether this will affect the capacity of Tesla’s U.S. plants is a concern.

Zack Kirkhorn said at Tesla’s earnings conference that he was “closely monitoring the issue of whether the supply chain of cars made in Fremont, USA, will be disrupted.” At present, the parts supply chain system of multinational auto companies are affected to varying degrees. U.S. auto companies, including GM, are using charter flights to airlift Chinese parts to the U.S. to keep local factories open. Jaguar Land Rover, Britain’s biggest carmaker, will bring Chinese parts to the UK by air to maintain production, but only for two weeks, Reuters reported.

Garrett Nelson, an analyst at CFRA, said Tesla was more concerned about the spread of the virus than other automakers because tesla’s short-term car production and revenue growth were heavily dependent on its new plants in China.

Can the target of 500,000 vehicles be met on schedule?

In addition to production, Tesla’s ability to meet its 500,000-vehicle delivery target depends on two factors: Whether the outbreak will affect demand for new energy vehicles, especially in the Chinese market. According to the February market retail sales figures compiled by Cui Dongshu, secretary-general of the National Association of Passenger Sutries, the daily retail volume of domestic passenger cars was just over 3,000 units as of February 23, down 89% year-on-year, and he expects retail sales to fall 75% year-on-year in February. Against such a bleak backdrop, expectations of market consumption are also falling.

Second, security factors. Tuesday’s hearing by the National Transportation Safety Board (NTSB) also raised concerns among investors about Tesla’s performance. The incident began when Mr. Huang, a 38-year-old Apple software engineer, drove to work in Mountain View, California, in a car crash nearly two years ago. Using Tesla’s Autopilot feature, he was playing mobile games on his iPhone for some time before the crash and was killed when his car hit a roadblock. The NTSB argues that Tesla does not provide an effective means to monitor drivers’ commitment to driving tasks, and that the risk of future accidents remains if Tesla does not add new safety measures to limit Autopilot’s use beyond the features it promotes.

Although there have been many crashes and Tesla’s market share has been growing since the Tesla Autopilot feature, the disclosure of the NTSB’s detailed findings will undoubtedly create uncertainty about Tesla’s performance.

Due to these factors, Tesla’s share price has changed from the previous surge, but a thousand miles. Tesla’s shares were trading at $679, down $99.8 from the previous day. In more than 20 days, Tesla’s share price has fallen nearly 30 percent from its previous high.

In China, however, Tesla’s electric car deliveries in the month were second only to BYD and SAIC passenger cars, even though january deliveries fell from a month earlier.