Munster Says Tesla Can 'Survive' Multiple Quarters Of Fremont Factory Shutdown

Loup Ventures managing partner Gene Munster on Wednesday said that Tesla Inc. TSLA will see "little impact" in the long term from its Fremont, California factory shutdown.

Tesla Required To Stop Manufacturing

Alameda County officials on Tuesday said that Tesla is "not an essential business" and can only maintain "minimum basic operations" at the Fremont factory due to the restrictions imposed in the wake of the novel coronavirus outbreak. 

A spokesperson from the county sheriff's office later told Buzzfeed Wednesday that Tesla has committed to reduce its workforce in the factory from the existing 10,000 to 2,500.

The spokesperson added that Tesla continuing to manufacture automobiles at the site will violate the law, and the sheriff's office would "bring them under compliance" in that scenario.

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Tesla Has Enough Cash To Sit It Out, Munster Says

Munster noted that Tesla isn't at risk of running out of money even if the pandemic mandates the automaker to keep the Fremont factory shut for an extended period of time.

"Two years ago, during the Model 3 ramp, Tesla was at risk of running out of cash with only [$2.5 billion] in the bank," Munster said.

"Today, a temporary production shutdown, even one followed by a material decline in global demand for new cars, does not put the company at risk of running out of money."

To support the argument that Tesla can survive multiple quarters, the former research analyst noted that Tesla's cash position is about $8.6 billion at the moment.

The automaker raised $2.3 billion in a stock offering in February.

Munster added that the cash is also likely to burn out slower given that a higher number of variable costs come from manufacturing, compared to components and labor.

Tesla Will Outdo Others

The Loup Ventures founder said that Tesla will "undoubtedly fall short" of the venture capital firm's previous estimate of 463,000 deliveres in 2020, but investors need to shift their focus to market share.

It's worth noting that other major automakers including Ford Motor Company F, General Motors GM, and Fiat Chrysler Automobiles (FCAU) have all shut down their factories in the United States, Munster said. 

"We continue to believe that Tesla will outpace the broader auto industry's delivery growth rate by 25 to 30 percentage points in 2020." 

Tesla could increase its delivery growth rate to 30% in 2021 again if the pandemic is over at that point, Munster said. 

Tesla Price Action

Tesla's shares closed 16.03% lower at $361.22 in Wednesday's regular session and traded 3.26% higher at $373 in the after-hours session.

Photo courtesy of Tesla.