What’s the Tesla Model 3’s actual market share potential? What’s the full size of the market the Model 3 is competing in?
These seem like straightforward questions, but they are quite complicated when it comes to the Model 3. Someone gave me the idea of researching this more than a month ago, but it has been more difficult to pump out a piece on this complicated topic than I’m accustomed to.
As we know, many people are trading in non-luxury cars for their Model 3s — the Toyota Prius, Honda Accord, Honda Civic, Nissan LEAF, and surely Toyota Camry and Toyota Corolla. Yes, they are also trading in a lot of BMWs, Audis, Acuras, and Lexuses, but the Model 3 is pulling from all over the market (including pickup trucks and sports cars). It’s electric, it has the coolest tech, it looks cool, and it has tremendous performance for the money — all of which are making it competitive in the higher and sportier classes. But that’s definitely not the only classes the Model 3 is competing in.
The chart above was published by Tesla after this article was drafted, but it displays the case perfectly. More than half of the cars traded in by Model 3 buyers cost less than $35,000 when new.
There are surely people who cannot or will not stretch from a $19,000 Civic to a Model 3, but the Model 3 is competing with the Civic (and winning) in some buyers’ minds. Furthermore, as Paul Fosse has shown, if you look at total cost of ownership, the Model 3 can be cheaper than a Toyota Camry or Toyota Prius — while offering much better performance and style.
Nonetheless, jumping from <$35,000 to >$49,000 is a huge jump that shows how far “out of its class” the Model 3 is already sitting. Furthermore, on the conference call, Tesla noted that it’s hard to identify any clear pattern regarding conquest sales since they are coming from all types of cars across all price points. This is something I thought I had gleaned from anecdotal data, but it is clearly much more powerful and interesting coming from Tesla itself.
So, how do we evaluate the actual market potential of the Model 3?
As I think you’ve gathered by now, there is no perfect answer to this, but I think a crowdsourced answer is likely to be the best approach, so I’m turning to you — our intelligent, thoughtful, informed readers — for some help with this one. Who has some thoughts on 1) the overall market size the Model 3 is competing in (in the US, for now) and 2) its genuine market potential with all options available and no pre-2019 reservations?
To prep the discussion a bit more, below are total numbers for a handful of potentially related market segments and core groupings in the US. (I’m not going to mess with a global estimate yet.)
The 20 most popular cars in the US in September had a total of 2,533,000 sales in the first 3 quarters of the year, and 2,847,000 in the first 3 quarters of 2017.
The 30 most popular passenger vehicles in the US in September had a total of 6,414,000 sales in the first 3 quarters of the year, and 6,140,000 in the first 3 quarters of 2017.
Non-Tesla US sporty car sales totaled approximately 300,000 in the first 3 quarters of 2018, and the same in the first three quarters of 2017.
Small luxury car sales totaled approximately 300,000 in the first 3 quarters of 2018 in the US, and approximately 340,000 in the first three quarters of 2017.
Midsize luxury car sales totaled approximately 260,000 in the first 3 quarters of 2018 in the US, and approximately 206,000 in the first three quarters of 2017.
Small car sales totaled approximately 1,740,000 in the first 3 quarters of 2018 in the US, and approximately 1,965,000 in the first three quarters of 2017.
Midsize car sales totaled approximately 1,300,000 in the first 3 quarters of 2018 in the US, and approximately 1,520,000 in the first three quarters of 2017.
Large car sales totaled approximately 246,000 in the first 3 quarters of 2018 in the US, and approximately 288,000 in the first three quarters of 2017.
Small SUV sales totaled approximately 2,894,000 in the first 3 quarters of 2018 in the US, and approximately 2,525,000 in the first three quarters of 2017.
If you assume the first 3 quarters = 75% of annual sales, the following would be the annual US sales totals for each of those groups in 2018:
- 3,377,000 — top 20 cars
- 8,552,000 — top 20 vehicles
- 400,000 — sporty car sales
- 400,000 — small luxury car sales
- 347,000 — midsize luxury car sales
- 2,320,000 — small car sales
- 1,733,000 — midsize car sales
- 328,000 — large car sales
- 3,859,000 — small SUV sales
US passenger vehicle sales totaled 17.25 million in 2017.
With all of that out there, let’s put the core question another way: How many vehicle purchases per year could be Model 3 purchases?
The related next question, naturally, would be how many of those potential purchases turn into actual purchases, but that’s a different story for a different day.
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