Coronavirus Could Be Good News for Musk and Co.

Steph Willems
by Steph Willems

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]

Steph Willems
Steph Willems

More by Steph Willems

Comments
Join the conversation
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

  • CanadaCraig You can just imagine how quickly the tires are going to wear out on a 5,800 lbs AWD 2024 Dodge Charger.
  • Luke42 I tried FSD for a month in December 2022 on my Model Y and wasn’t impressed.The building-blocks were amazing but sum of the all of those amazing parts was about as useful as Honda Sensing in terms of reducing the driver’s workload.I have a list of fixes I need to see in Autopilot before I blow another $200 renting FSD. But I will try it for free for a month.I would love it if FSD v12 lived up to the hype and my mind were changed. But I have no reason to believe I might be wrong at this point, based on the reviews I’ve read so far. [shrug]. I’m sure I’ll have more to say about it once I get to test it.
  • FormerFF We bought three new and one used car last year, so we won't be visiting any showrooms this year unless a meteor hits one of them. Sorry to hear that Mini has terminated the manual transmission, a Mini could be a fun car to drive with a stick.It appears that 2025 is going to see a significant decrease in the number of models that can be had with a stick. The used car we bought is a Mk 7 GTI with a six speed manual, and my younger daughter and I are enjoying it quite a lot. We'll be hanging on to it for many years.
  • Oberkanone Where is the value here? Magna is assembling the vehicles. The IP is not novel. Just buy the IP at bankruptcy stage for next to nothing.
  • Jalop1991 what, no Turbo trim?
Next