One only needs to look at Western Europe’s April car sales to know that 2020 has been a disaster for all vehicle manufacturers including Tesla (NASDAQ:TSLA). On a relative basis, however, Tesla’s April decline was actually pretty good, which is great news if you own TSLA stock.
Here’s why.
According to the European Automobile Manufacturers’ Association (ACEA), the overall sales in Western Europe in April fell by almost 80%, led by declines of 97.6% and 96.5% in Italy and Spain, respectively.
The association’s data shows that the car company with the best result in April was Lada, which is owned by Renault (OTCMKTS:RNLSY).
It saw April sales fall by 48.6%, selling a whopping 107 vehicles over the 30-day period. Lada’s sales for the entire European Union fell 71.2%. By comparison, Volkswagen (OTCMKTS:VWAGY) saw its legacy brand’s sales fall 76.9% in Western Europe and 74.3% for the entire European Union.
Nissan (OTCMKTS:NSANY) and Honda (NYSE:HM) saw sales decline by more than 80%.
And Tesla? According to Forbes, Tesla’s sales in the Western Europe region dropped by 38% in April, to 2,737. While Tesla isn’t a member of ACEA, if these numbers are accurate, it’s another reason why Tesla stock is the best of a bad bunch. None of the other car companies have Tesla’s online sales model to fall back on during a pandemic.
Overall, sales in Europe are expected to fall between 15% and 30% in 2020.
HowNorth America Sales and TSLA Stock
In the first quarter, only four brands had year-over-year increases in U.S. car sales: Kia (+1%), Lincoln (+2.8%), Ram (+2.5%), and Tesla (+72.5%). If you’re a Tesla shareholder, this figure has got to make you smile amidst all the carnage.
As for electric vehicles, Tesla sold an estimated 11,925 vehicles in April, 98% higher than a year earlier. It accounted for 58% of all plug-in electric car sales and 78% of all fully electric vehicles.
Not unexpected, April vehicle sales in the U.S. declined by 24.5% over the same period last year to 8.6 million units on a seasonally adjusted annualized basis. However, the consensus estimate was for 7.4 million vehicles, so the numbers actually beat expectations by 16%.
Also not a surprise, light trucks accounted for 77% of all sales in April.
Thank goodness for cheap gas and the fact that business picked up toward the end of the month. TD expects new-vehicle inventory to spike to 140 days in the second quarter, the highest it’s been since late 2008. This translates into great deals for consumers on 2020 models and lower profits for dealerships.
Interestingly, the average transaction price in April went up, to $38,060. With all the unemployment in the country, that’s a head-scratcher.
“Despite our expectation that retail sales volume will be cut in half in April due to the impact from COVID-19, average transaction prices continued their upward trajectory, hitting record highs this month,” said Eric Lyman, Chief Industry Analyst for ALG, a subsidiary of TrueCar.
Apparently, consumers think it’s a good idea to overpay for their vehicles, just so they can get an 84-month, 0% loan. The industry gives with one hand and takes with the other. But that’s a subject for another day.
The point is that automotive sales in North America appear to be far more resilient than those in Europe.
What’s This Mean for TSLA Stock?
Ark Investment Management founder and CEO, Catherine Wood, originally predicted Tesla stock would reach $4,000 by 2023. At the beginning of 2020, Wood upped that number to $7,000 by 2024.
Since the pandemic hit, she’s cut the projection to $6,800 by 2024, to factor in a struggling economy, etc. That’s based on a belief that Tesla will start an “Uber-like” business before moving on to an autonomous car service.
“I’ve always said to analysts, wherever I’ve been a portfolio manager, that the truth wins out,” Wood told Institutional Investor in April. “If we’re right, we’re going to be rewarded.”
Indeed they will. If you’re long Tesla, stay long. If you’re not, there’s still plenty of room on the bandwagon. As long as Elon Musk continues to push the innovation button, good things are bound to happen.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
