Tesla leaps ahead as Big Auto’s EV transition plans hit by Covid-19 pandemic

The Driven

Elon Musk may well be battening down the hatches at Tesla while the Covid-19 pandemic forces the closure of key manufacturing plants, or Gigafactories, and the company imposes a hefty pay cut for senior executives and stand-downs, known as furloughs in the US, for employees that can’t work from home.

But the stock market and leading analysts has judged that the problems facing Tesla are minimal compared to those of the huge legacy car-makers, or Big Auto, that are struggling to keep pace with the transition to electric vehicles.

In the last few trading sessions, Tesla stock has surged more than 60 per cent, and leaped 10 per cent in Tuesday’s after-market alone, taking its market capitalisation to more than $130 billion ($A202 billion), while those of  GM, Ford and Fiat Chrysler have trodden water at best. Tesla is now worth more than all three combined, even though it produces a fraction of their volume.

Why this surge?

Analysts say it is because Tesla already has a big start over its rivals, and the market is just starting to appreciate the importance of this as the efforts by legacy car makers to try and recoup lost ground are hamstrung by their lack of cash.

According to Barrons, one of the most skeptical Tesla analysts, Credit Suisse’s Dan Levy, has noted that Tesla rivals face what he describes as a “two-clock” situation. They need to transition, to keep up with the technology shift and new fuel efficiency requirements in Europe and the US, but now they need to do it while their earnings and cash flow dry up in a recession.

“Tesla is only working on one clock,” Barrons quotes Levy as saying. “It is solely focused on electrification and doesn’t have the dilemma of balancing a transition.”

This is a similar theme to that taken up by Morgan Stanley analyst Adam Jonas, who expects costly EV transition programs and rollouts at Big Auto to be delayed by the impact of the Covid-19 pandemic. Even EV start-up Rivian has been forced to delay the release of its electric utes and trucks, according to one report.