There are a lot of headwinds for the automotive industry in 2020, but I don’t expect anybody had factored in the coronavirus is a major part of their planning. However, a sector that is grappling with electrification, balancing CO2 figures in Europe, a trade dispute between the US and China and falling consumer demand is now having to close down factories and rein back on production because of the extent of contagion across the China region.
And the analysts have started to play this game as well. They are comparing it to the SARS outbreak 16 years ago. They reckon that it could see a potential 3-5% slashed off global production if it all turns sour. But most of them are hoping that the outbreak will be mainly contained in China.
Elon Musk does not do things quietly. And he has taken great delight in the discomfort of hedge funds over the past few weeks. Apparently Tesla is the most shorted stock on the planet at the moment. And in case you do not know how shorting works, hedge funds borrow shares from something like a pension fund for say six months. They sell them in the hope of buying them back cheaper and handing them back. But it leaves you with a little bit of egg on your face if the shares double or triple in the meantime.
And since last summer, Tesla has boomed – in late May they were listed at $185. At the start of this week they were at nearly $900. In theory if you had borrowed 1m shares for 9 months, you could be looking at a loss of $71.5m. And many have found themselves in this situation, with a position to square by the end of January. It meant not only was it costing them a fortune, but as everybody was after the same stock, it’s price ratcheted up. You have to feel sorry for them, don’t you?
In fact the stock has slipped back a little this week, largely on the news that they will be cutting production in China because of the aforementioned coronavirus. Nevertheless the company is riding high compared to last year $740 as I write this, and looks as if it will make a significant profit this year too.
Which is more than may be said for some dealer groups in 2020. Figures in January look pretty dire, even though many of the groups I have spoken to are of the opinion that the market has picked up. For many this is franchise specific, and any dealer over reliant on diesel is likely to remain in a pretty poor place. Digital registrations are now back to 2000 levels, when they formed less than 20% of registrations.
Have a great weekend, I would not bother getting your kite out for Sunday.
About the time we think we can make ends meet, somebody moves the ends.
Herbert Hoover (1874 – 1964)
Humor is our way of defending ourselves from life’s absurdities by thinking absurdly about them.
Lewis Mumford (1895 – 1990)
The trouble with having an open mind, of course, is that people will insist on coming along and trying to put things in it.
Estimated amount of glucose used by an adult human brain each day, expressed in M&Ms: 250
Harper’s Index, October 1989
You can adjust all of your cookie settings by navigating the tabs on the left hand side.