Well, they did it. They beat expectations for sales in the U.S. in an historically bad quarter economically. Sales of their more popular models offset a huge decline in sales of less-desired models, and they managed to come in slightly better than estimates overall. Sales in the more important consumer channel offset declines in wholesales to corporate buyers.
Of course I am talking about Ford (F) , not Tesla (TSLA) . Both companies managed to beat expectations for 2Q sales. Ford stock has had a nice little pop, helped by the overall market gains on better-than-expected jobs numbers, and has added about a billion dollars to its market cap this week. Tesla, on the same news, has added about $25 billion to its market cap this week.
This is the bizarro world we live in. The market goes up every day, seemingly, as numbers beat expectations. But, especially when it comes to non-farm payrolls, those expectations have been so wildly off every month in the Covid-19 era, shouldn't there be a day when we start to ignore them? Today is that day, at least for me.
A quick look at Tesla delivery numbers shows a 4.8% year-on-year decline in deliveries in Q220. Model 3 deliveries showed slight growth, 3.9% year-on-year, as strength in China from output from Tesla's recently-opened Lingang plant offset weakness in Europe. U.S. sales were undoubtedly aided by a 5% cut in prices on the entry-level Model 3 announced on May 27th. In contrast, sales of the higher-priced S and X models continued to plunge, registering a combined 64% decline in sales in Q220 versus Q219. Prices on those models were also slashed on May 27th, but there is characteristically less elasticity among high-luxury buyers. So lower prices and the acceptance of a worsening mix, plus leftover inventory from a truncated first quarter, were enough to keep Lingang and Fremont running during the quarter, at least when local authorities would allow it.
Now look at Ford. The headline figure of a 33.3% decline in U.S. sales hides the reality of a complete degradation of one of Ford's distribution channels. Commercial sales fell 78% in the quarter and daily rental sales fell an astounding 94%. The daily rental business will never return from this Covid-19 malaise. Hertz (HTZ) , a major customer of Ford, died in the first quarter. If you don't realize that and are "playing" HTZ stock, you should click elsewhere because this column is too advanced for you.
But Ford's retail sales fell only 14.3% in the worst quarter (on a GDP basis) in recorded U.S. history, and Ford's U.S. truck sales fell only 0.4%. No, nobody wants passenger cars now, especially since a lot of those are sold to fleet buyers, such as Hertz. But the Blue Oval actually sold a combined 10,000 more Rangers and Explorers in Q220 than they did in Q219.
So, the profitable products -- F-Series sales fell 23% in Q2, but that model always shows sales declines ahead of the launch of a replacement -- outperformed the less-profitable products. Ford's mix improved substantially in the quarter, while Tesla's worsened.
So, that's where expectations come into play. The range of estimates for Tesla's 2Q deliveries were all over the map. It is clear to me, with a decade of sell-side auto analysis in my past, that these analysts have zero interest in actually measuring Tesla's sales or output. I believe Tesla was doing some final assembly while in "shutdown" at Fremont (published photos confirm this) and, clearly, Tesla had excess inventory at the end of the first quarter, about 10,000 units worth, by my figuring. So, availability was not an issue.
But, again the Street just totally missed this, and somehow Tesla's 3.9% retail sales decline was 25x more important than Ford's 0.4% retail sales decline in trucks.
I made money on a short position in Tesla last week, but covered that position last Friday as I read a story in Electrek that noted that Tesla "had a chance" to meet last year's delivery target. They did not, but Tesla gadfly Fred Lambert once again proved to be much more accurate than the Street in his predictions. Is that because he is getting his info from the top at Tesla? I mean from the very, very, very top. Possibly. Only Elon and Fred know for sure.
But at least Electrek adds value by presenting accurate information on Tesla, while Wall Street continues to do the opposite. At 90,650 units delivered, Tesla' could make a profit in the second quarter -- as Fred Lambert first noted TWO weeks ago in Electrek. It will depend on how many ZEV credits (which have no corresponding cost) Tesla recognizes in its Q2 financials. That amount was $354 million in the first quarter. How much will it be in the second quarter? I have no idea, and neither does the Street, but I will keep checking Electrek for updates.
It is a very, very, scary time in the markets. There is just no reliable information. Stocks are moving completely on sentiment. I can't decide which is more amazing, TSLA's stock price run or HTZ's. In a world so topsy-turvy, I am actually -- for the first time in 30 years -- considering buying Ford stock. I guess 2020 really has been a bizarre year.