Tesla Inc.’s (TSLA) billionaire founder Elon Musk said that the electric car maker sees “strong” order demand during the coronavirus pandemic even as some dealerships have been shut down.
“We saw strong orders through the whole pandemic, we still had a good order volume,” Musk said in an interview to Automotive News’ Daily Drive podcast released on Friday. “I guess people are less inclined to want to go to a dealership, do the test drive and hang out in the lobby and that kind of thing.”
During the second quarter, Tesla’s vehicle production was affected by the pandemic, like most other automakers. Its main California factory was shut down for more than a month, and a lot of its retail operations were closed due to restrictions put in place to try to slow down the pace of the pandemic.
What’s more, the global economic crisis made many people think twice about a large purchase like a vehicle. Nonetheless, Tesla performed relatively well, with deliveries being down only 5% compared to last year while most other automakers saw a decline of 30% or more in deliveries.
Looking ahead, Musk sees the lesson learnt from consumer behavior during the pandemic for the car industry is the shift to online shopping.
“Having a traditional dealer situation, I think, seems increasingly unnecessary and I think probably the pandemic just reinforced that,” Musk said.
The electric vehicle maker’s shares have surged a stellar 242% year-to-date as it reported 90,650 car deliveries in the second quarter, which exceeded analysts’ expectations for about 74,130 vehicles.
“It’s not worth trying to massage the stock market or manage investor expectations,” Musk said. “At the end of the day, if you make great cars and the company’s healthy and making great products investors will be happy…If you make lousy products your customers will be unhappy and then your investors will be unhappy.”
Tesla recently launched a recruiting bonanza in Shanghai to hire designers at its China studio and about 1,000 factory workers. The move is part of the electric vehicle maker’s plan to ramp up manufacturing in the world’s biggest auto market. Back in January, Tesla announced plans to open a design and research centre in China to make “Chinese-style” cars.
“China rocks in my opinion,” Musk said. “There are a lot of smart, hard-working people. And they’re really, they’re not entitled, they’re not complacent, whereas I see in the US increasingly much more complacency and entitlement.”
Last week, Morgan Stanley analyst Adam Jonas raised the stock’s price target to $1,050 (27% downside potential) from $740 and the “bull case” PT to $2,500, from $2,000, on prospects of Tesla becoming “a very, very large auto maker”.
“Our forecasts give Tesla credit for continuing to attract world’s best talent at the industry’s lowest-priced cost of capital,” Jonas wrote in a note to investors.
The analyst still maintained a Sell rating on the stock as the rest of the Street has a cautious outlook with a Hold analyst consensus. In view of this year’s strong rally, the $1,268.96 average analyst price target now implies 11% downside potential for the shares in the coming 12 months. (See Tesla’s stock analysis on TipRanks)
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