Tesla is in trouble if the coronavirus tanks the US auto-sales boom of the past 5 years - Business Insider

On one hand, Tesla has one critical advantage over traditional automakers: It doesn't have franchised dealerships to worry about closing or curtailing service if state and federal government declare business restrictions, as has happened in Italy.

On the other hand, Tesla has just one factory in the US, located in Northern California, where the COVID-19 outbreak has been concentrated in relation to the rest of the state. Ford, General Motors, and Fiat Chrysler Automobiles might continue to operate in the Midwest — and Toyota, Honda, Nissan, VW, BMW, and Mercedes-Benz in the South — even if Tesla has to shut down in the San Francisco Bay area.Meanwhile, Tesla also has the least cash on hand of any US manufacturer: about $6.5 billion.

Cash and debt, not equity, are what keep automakers going in recessions, when profits collapse and turn negative. Tesla hasn't ever endured a down cycle as a mature automaker — it was barely selling any vehicles in 2008-09, when the US car market swooned, but it sold about 360,000 vehicles in 2019 — and for its entire 16-year history has been optimized for growth.Growth in the auto industry is extremely expensive, and Tesla is starting more or less from scratch.

Tesla, then, isn't in particularly good competitive shape to weather a recession that lasts more than a few quarters. If COVID-19 retreats, however, and the sharp downturn we're now seeing relents, Tesla would probably be OK. Ironically, the relatively modest size of its business means that it has less to worry about than a massive, multinational carmaker dealing with coronavirus in dozens of local markets.

Business Business Latest News, Business Business Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

Tesla sends memo to workers about coronavirus impact on pay, safety - Business InsiderTesla just reopened its Shanghai factory, now it has to deal with what coronavirus will do to its factories in the US. lopezlinette
Source: BusinessInsider - 🏆 729. / 51 Read more »

Disney risks $1.5 billion revenue if US parks close 30 days: analysts - Business InsiderDisney risks losing $1.5 billion in revenue if it's forced to close all US theme parks for 30 days, analysts forecast People’s health are more important! Disney will be ok. Make another Avengers movie.
Source: BusinessInsider - 🏆 729. / 51 Read more »

US banks risk seeing revenue from fees slip over the next few years - Business InsiderBanks should confront the possibility of a slip in fee revenue by reducing fees and providing money management tools to gain customers' trust 😂😂😂😂😂
Source: BusinessInsider - 🏆 729. / 51 Read more »

US hospitals may run short on ventilators in coronavirus pandemic - Business InsiderThe US has about 170,000 ventilators, which could help keep very sick coronavirus patients alive. That may not be enough.
Source: BusinessInsider - 🏆 729. / 51 Read more »

Business jet operators see demand surge on U.S. travel restrictions, coronavirusNew U.S. restrictions on Europeans entering the United States are fueling additi... Heading off to private islands and medical clinics are we? Hmmm. Private jets should also have to follow the ban. Another loophole.
Source: Reuters - 🏆 2. / 97 Read more »