The pressing coronavirus pandemic has caused economic uncertainty across several industries. Among the most affected, the electric vehicle industry may take a heavy toll. Notably, the lowering prices of gas and plummeting demand for luxury vehicles have put Tesla in jeopardy.
Tesla’s first-quarter vehicle deliveries report seems to have shown incredible endurance. So far this year, the company has produced over 103,000 vehicles and sold about 88,400. This marks a milestone for the company, representing its best first-quarter performance to date.
However, the road ahead seems more uncertain. Amid the indefinite COVID-19 shutdown, Tesla may not be able to recuperate for lost time during the second quarter.
Q2 May Not Be as Promising for Tesla
Tesla’s most recent press release does not take alarm to this possibility. Rather, the company believes its current cash position is “sufficient to successfully navigate an extended period of uncertainty.”
Projections have predicted Tesla could endure a frozen market until mid-June. In this sense, the sustainability-minded company is far ahead of the game compared to some other auto companies, who have already contemplated bail-out requests only a few weeks into lockdown.
Attempting to salvage some economic merit during the recent recession, Tesla has made a move to “touchless deliveries.” The company hopes that this contactless car delivery option will increase sales during social distancing.
Plummeting Oil Prices Threaten Tesla
The decrease in global oil prices also sets the stage for further market difficulty for Tesla.
Notably, recent price wars between Saudi Arabia and Russia have led to a global decrease in the crude price of oil. So while auto-manufacturers and airlines are celebrating, companies like Tesla are feeling the pressure.
Generally, low oil prices are bad news for the electric vehicle industry. With low gas prices, consumers will see an added benefit to sticking with their traditional gas engine car. Accordingly, the appeal of purchasing an expensive, electric vehicle will decline. In all, while cheap gas helps consumers at the pump, the demand for more expensive, fuel-efficient vehicles is on the decline.
Tesla will likely face the brunt of this market disadvantage. Even more broadly, a global drop in fuel prices could have drastic repercussions for sustainability in the auto industry all around.
Yet Tesla’s unique consumer base could cushion some of this fall. As environmental values and aesthetics steer many of Tesla’s consumers, their loyalty is less dependent on the fluctuating supply and demand for oil.
The Auto Industry Regressing From Sustainability
As the best-known electric car producer, the rest of the automotive industry may take notice of Tesla’s potential decline in the coming months. Accordingly, we may see a drop in initiatives from other companies to advance the development of electric cars.
This could cause a decrease in funding for research on electric vehicles, stalling progress towards a more eco-friendly auto industry.
Already, the electric vehicle market is fairly small and largely considered a luxury good compared to competing brands. A shock like this could quite seriously set back the wider introduction of electric vehicles into the automotive market.
And as green consumption is largely dependent on market health, a recession could pose a threat to much more than Tesla’s sales. It could imply a major step backward for sustainable transportation on a much larger scale. But as are most matters at the moment, the outcome is full of uncertainty.