Coronavirus Could Be Good News for Musk and Co.

Steph Willems
by Steph Willems
coronavirus could be good news for musk and co

Tesla, if you haven’t heard, posted a first-quarter profit on Wednesday — a slim one, to be sure ($16 million), but black ink nonetheless. Compare that to the likes of much larger automakers like Ford. Of course, Tesla waited longer to shut down its sole American assembly plant, and it can chalk up its surprising financial buoyancy to hundreds of millions of dollars of emissions credits sold to rival automakers with far dirtier footprints.

While Q2 is widely expected to be a bad one for all involved, including Tesla, the electric automaker might see a silver lining from the coronavirus pandemic.

Namely, decreased R&D investment and delayed or deferred product launches. Belt-tightening was already all the rage before the virus hit, but so to was getting out in front of legacy rivals with an all-electric vehicle. For many, such products are already too far down the development road to axe, while others are far enough away to keep on the books.

With hard economic times upon us, guaranteed money makers like trucks and SUVs will take on an even greater importance for OEMs.

All of this could work in Tesla’s favor, CNBC reports. According to IHS Markit’s Matteo Fini, head of the firm’s supply chain and technology forecasting, EVs “are not the core focus of consumers.” With profit generation being top of mind more than ever, “Some things have to give, and e-mobility deployment might be some,” Fini said.

After surveying 140 automakers and suppliers, IHS claims automotive R&D spending will decrease 17 percent his year and 12 percent in 2021. Software development is expected to see the biggest bite.

We’ve already seen one future vehicle fall victim t the pandemic; that being Lincoln’s Rivian-based SUV, which the automaker scrapped earlier this week. A collaborative project is still expected to reach the market, just on a later timeline. CNBC reports that the upgraded Chevrolet Bolt’s introduction will be pushed back a year, to 2022.

Elsewhere, product launches are in disarray following the North American auto industry’s shuttering during the Great Lockdown. Many will be pushed back, giving Tesla more time on the market with only existing EV products. To be sure, the automaker has more competition that ever, but the company’s name is still found on roughly three out of every four EVs sold in the U.S.

It also has a rapturous fan base that shuns any rival EV as being impure, helping it retain customers and attract new ones.

All that said, new rivals are on the way, coronavirus or not. GM has no plans to deep-six its proposed GMC Hummer EV, nor does Ford intend to do away with its Mustang Mach-E.

[Image: Aleksei Potov/Shutterstock]

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5 of 21 comments
  • Jmo Jmo on May 01, 2020

    With the collapse of the oil industry, mass unemployment in the oil patch, the state of Texas on the hook for 10s of billion to cap the abandoned wells of bankrupt drillers - how much of a hit will that take out of the traditional truck and SUV market.

    • See 2 previous
    • Imagefont Imagefont on May 03, 2020

      addm I couldn’t name a single fracking company. A lot of them are small operations. I was told a few years ago that lifting costs are in the high $20’s to low $30 range, per barrel. It depends on the well. Big players are well capitalized and they use dips in the market to build more infrastructure at lower cost. Fracking requires fresh(er) water, not the horrible salt water produced that is re-injected, and frack sand. Usable water is in tight supply and sand operations are everywhere. Midland is practically lit up at night by flares and the road from Pecos to Orla is the most dangerous road in Texas. There is a LOT of oil in this area and drilling and production operations are continuing unabated. The landscape is almost unrecognizable compared to even just 10 years ago. I dare you to find me one well that’s being capped. A short term price collapse from a temporary pandemic is not going to scare anyone out of business. I do think it’s funny though that WTI went negative for a while there due to storage capacity issues.

  • Addm Addm on May 02, 2020

    All the fracking companies have high debt and no profits to show for. Their survivability was questioned even at Crude oil price of 50 dollars. Do you care to explain which fracking company is in good financial condition

  • Brett Woods 2023 Corvette base model.
  • Paul Taka Hi, where can I find 1982 Honda prelude junkyards in 50 states
  • Poltergeist Make sure you order the optional Dungdai fire suppression system.
  • Prabirmehta I charge my EV at home 100% of the time. The EV is used for in-town driving and the gas guzzling SUV is used for out of town trips. This results in a huge cost saving and rare trips to the gas station.
  • Conundrum Three cylinder Ford Escapes, Chevy whatever it is that competes, and now the Rogue. Great, ain't it? Toyota'll be next with a de-tuned GR Corolla/Yaris powerplant. It's your life getting better and better, yes indeed. A piston costs money, you know.The Rogue and Altima used to have the zero graviy foam front seats. Comfy, but the new Rogue dumps that advance. Costs money. And that color-co-ordinated gray interior, my, ain't it luvverly? Ten years after they perfected it in the first Versa to appeal to the terminally depressed, it graduates to the Rogue.There's nothing decent to buy on the market for normal money. Not a damn thing interests me at all.