In a report out today, we explore the level of cash burn while US facilities are not operating. Bottom-line is Tesla has plenty of liquidity to withstand a 6+ month shutdown…far beyond what we think is likely. We also take a stab at revised estimates, which assume that a weakened consumer leads to lower volumes, although we see several reasons that Tesla volumes will hold up better than most.
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Survival is the first question to get out of the way in today’s environment. Our deep analysis of Tesla’s cost structure indicates that the cash burn would get ugly starting in week 4 (due to working capital unwind), but even if the US shutdown extended into mid-June (very unlikely in our view), the cash balance (ex-credit lines) would remain well-above $3bn (from $8.6bn at 2019YE, proforma for the February equity offering).
JD Power provided an update on their U.S. Auto Sales outlook in a presentation yesterday. The presentation included interesting datapoints illustrating the magnitude of declines in new and used vehicle sales over the past few weeks. Notably they expect April to come in softer than March. And surprisingly, used is weakening even more than New. JDP shares our concerns about falling used prices, and they see elevated dealer inventories as a headwind to a production recovery later this year.
The breadth and slope of the decline in global economic activity post COVID-19 is unprecedented. For Autos, while there is still relatively little visibility into the intermediate term outlook, there is a growing view within the Industry that the pattern of declines globally will mirror that which was experienced in China. We’ve been seeing this in Europe. And our contacts suggest that a similar pattern is emerging in the U.S. We are lowering our Global Auto Production forecast for 2020 to -20%. Embedded within this is a U.S. Light Vehicle Sales assumption of 12 million (down from 17 million in 2019), in-line with the 10-12 million unit “guestimate” that we’ve heard from Industry contacts.
We wanted to flag a few highlights in today's (03/19/20) Wolfe Research Auto Daily....
We’re updating estimates for Lyft and Uber to reflect COVID-19 (CV) disruptions, using data from Uber Hong Kong and Didi China as a rough guide on peak-to-trough volume. We assume that Rideshare trip volume in US and Europe runs 50%-70% below pre-CV levels from mid-March through mid-June and that it takes 6 months to get back to 90% of pre-CV volumes. We are not adjusting revenue for Uber Eats as indications from Asia are that Food Delivery has not been meaningfully impacted. We’ve undertaken detailed quarterly cost est’s and our independent work roughly validates Uber management’s comments that approx two-thirds of the cost structure is at least partially variable.
We wanted to flag a few highlights in today's (03/18/20) Wolfe Research Auto Daily....
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