Tesla Has Q1 Profit, Ford and Rivian Scrap Plans to Build EVs

Photo: Yahoo Finance

CNBC reported yesterday that despite factory closures in China and the U.S., Tesla managed to eke out $16M in profit in the first quarter of the year, but it remains unclear how quickly its U.S. car plant and suppliers can ramp up production once it re-opens after the lifting of COVID-19 restrictions. However, according to Yahoo Finance, Ford has scrapped its deal with Rivian, a Michigan-based electric vehicle company, to make an electric vehicle (EVs)  under its luxury Lincoln brand.

Why This Matters: The COVID pandemic is a setback for many industries — but particularly ones working to get off the ground like electric vehicle manufacturing. It is impressive that Tesla managed to sell cars even as it experienced  coronavirus-related business disruptions and employed a “contactless” delivery option in the U.S. as well as continued to service vehicles. But the virus was too much for even well-funded Rivian in its partnership with Ford, though there may have been other issues that led the companies to take their partnership in a different direction.  GM also had to postpone the initial unveiling of its high profile Hummer EV beyond its scheduled May 20th date.  None of these setbacks appear related to the plunge in oil prices.  

Musk Frustrated With Closures in the U.S.

On an earnings call on Wednesday, Tesla CEO Elon Musk called California’s shelter in place orders “unconstitutional” and “fascism” in what CNBC described as “a profanity-laced tirade.”  Tesla’s manufacturing was also impacted by shutdowns of plants in Nevada where it makes component parts for its EVs as well as solar products.  The company said it expects to see those hits to their profitability in the second quarter of 2020. According to CNBC, Tesla has furloughed workers, cut pay, and axed many of its contractors. Yahoo Finance reported that Musk told analysts that they are “absolutely continuing our Model Y capacity expansion at full speed at both Giga Berlin and Giga Shanghai and here in Fremont when they will let us continue.”

EV Outlook Still Strong

Industry analysts predicted earlier this month that sales of EVs will be down by 43% in 2020 due to the pandemic.  They expect sales to be down this year globally due to the recession but to rebound in 2021 when markets come back due to government stimulus funds, as well as because of the major investment in EVs by most auto manufacturers.  Sales of all autos are expected to be depressed in 2020 due to the virus.  Indeed, one analyst predicted that “as we start to come out of this, a lot of people are going to think, ‘I don’t want to go back to polluted air and all that noise…that there will be much more awareness and interest in cleaning up our soundscape and our air, now that people have had a taste of what it can be like.”

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