Tesla is reporting Q1 earnings this week, but all that matters during the coronavirus crisis is cash, cash, cash

• Tesla reports Q1 earnings on Wednesday after the bell.
• Analysts expect improvement on the topline, year-over-year, but a loss on the bottom line.
• Tesla is dealing with the COVID-19 pandemic just as is every other major automaker, but the impact of the crisis won't show up entirely in Q1. The second quarter is a different story.
• All that matters now for automakers is how much cash they have on hand; Tesla is no exception.
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Tesla is reporting first-quarter earnings on Wednesday after the markets close, and analysts expect a big uptick in revenue from Q1 2019, to more than $6 billion, but a loss of about $1 per share (around $0.30 on a non-GAAP basis).

With various companies beginning to report financial results for the first three months of the year, a theme is emerging: business was relatively good through mid-March, when the COVID-19 pandemic caused massive shutdowns in the consumer and manufacturing economies. Then things fell off a cliff.

Tesla can't avoid the simple fact that it hasn't been able to build cars for a month, nor can it conjure sales from customers who have been sheltering in place. But the impact of those difficulties won't show up until the company adds up the second-quarter numbers.

More pressing is how Tesla plans to ride out the remainder of Q2 and stay afloat through a gradual restart of the US economy in the second half of the year. Beneficially, the carmaker's new factory in Shanghai, after being idled while China dealt with its own COVID-19 outbreak, has come back online, so lost business in the US and Europe could be compensated by a recovery in the Middle Kingdom.

But more importantly, Tesla needs to demonstrate some old-school, balance-sheet strength in 2020. Wall Street is going to be laser-focused on cash, cash, cash.

Fortunately, the company's cash position is better than it's ever been, with about $8 billion on hand. You could call the $2.3 billion capital raise Tesla executed in February a stroke of lucky timing, but money is money.

The auto industry is going into a defensive crouch

Throughout the auto industry, major manufacturers are going into a coronavirus defensive crouch, suspending dividends and share buybacks, asking executives to take pay cuts, and trimming payrolls. Because they're so large, they have to manage staggering cash demands with revenue going to zero in the short term. In the car business, you can stave off just about anything — as long as you keep selling cars.

But when you stop selling cars, well ... you can go broke in a hurry. That's what the Detroit Big Three — General Motors, Ford, and Fiat Chrysler Automobiles — are up against. On the plus side, the Big Three have spent ten years racking up profits; they have what look externally like fortress balance sheets and plenty of access to borrowing. But they have to spend so much cash every month to keep the lights on that the burn can be intense.

Tesla's relatively modest scale is an advantage, in this context. It would be better if Tesla were smaller, but the company hasn't yet matured into a major cash-burner, even though it's shown abundant capacity to obliterate capital in the past. Of course, that spending was undertaken to grow.

Slower growth, and cash is king

So the situation that Tesla now finds itself in is to grow more slowly — it likely won't hit its guidance of 500,000 vehicle deliveries in 2020 — but to recover from the pandemic more rapidly. The only Q1 earnings question that then matters is how much cash Tesla has by, say, the end of the summer.

But even if that total is worryingly low, with the share price still at historic levels — over $700 per share at a time when Ford has dipped into the low single digits — new capital raises are always an option, and the markets have demonstrated no lack of appetite for those, nor have they penalized Tesla for technically running out of money in the bank. (You could call this a Tesla "put," and it should give short sellers pause.)

So forget the topline and the bottom line this week when Tesla reports. Zero in on the cash — and how much of it CEO Elon Musk and his team expect to spend in the coming months.