What's going on?
The current economic situation is making a dummy out of every industry, and Europe’s carmakers – which have already seen sales fall by more than 7% this year – are bracing for the worst.
What does this mean?
The autos industry is already on the back tire because it’s “cyclical”, which means cars are one of the first purchases consumers will sideline if they’re preparing for, say, a pandemic. But the industry has another roadblock too: there might not be any cars available even if people want them. BMW, for one, announced on Wednesday that it would shut down its European and South African factories for a while, and so did arch-rival Daimler and the world’s biggest automaker Volkswagen. And while recent border closures – including between the US and Canada – don’t affect essential trade, cars might not fall into that category for long if Tesla’s anything to go by…
Why should I care?
For markets: Tesla goes into shutdown.
There’s a lot of correlation between stocks at the moment – i.e. they all tend to move in the same direction at the same time – which makes backing an individual company even harder than usual. But Tesla’s stock, which dropped 10% on Wednesday, fell by more than most. The carmaker had initially kept its Califonia plant open, but the government – which deemed the business non-essential – shut it down on Wednesday. The investors who then sold off Tesla’s stock probably did so because of the damage a shutdown will have on its ability to manufacture and deliver its electric vehicles.
Zooming out: Prime the pump.
The oil price plumbed lows not seen since 2002 on Wednesday, due in part to Saudi Arabia’s increase in production (tweet this). Tesla drivers might not need to pay much attention, but other car-owners are all ears: their gas costs are now likely to come down sooner or later.