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Tesla Model 3 = #1 Top Selling Car In California In Terms Of Revenue — Q1 2019

Demand for the Tesla Model 3 remains very high in California, with 15,805 sales throughout Q1 2019, giving it the #1 spot in terms of revenue out of all vehicle models sold — and by a huge margin (79% more than the runner up). As reported last night, it also held the third spot in terms of unit sales.

Demand for the Tesla Model 3 remains very high in California, with 15,805 sales throughout Q1 2019, giving it the #1 spot in terms of revenue out of all vehicle models sold — and by a huge margin (79% more than the runner up). As reported last night, it also held the third spot in terms of unit sales. The Tesla Model 3 was only marginally beaten on unit volume by the Honda Civic (+18.5%) and Toyota Camry (+1%), both of which sold for approximately half the price. The Tesla Model 3 also took 46% of the premium midsize sedan market, almost 4× the volume of the category runner-up Mercedes C-Class.

The estimated revenue figures in the chart are derived from the base pricing of each model. The actual average selling price per vehicle will likely be somewhat higher, but will be roughly proportional to the base pricing, so the chart records the likely relative performance of each model. The Civic and Camry start at $19,450 and $23,845, respectively. The Tesla Model 3’s starting price evolved over the quarter, but the lowest priced variant, the Mid Range, was priced from $42,900 around the mid-point of the period, so I’ve taken this as the basis for the revenue comparison.

Here are the top 5 best sellers by unit volume:



And the top sellers in the premium midsize segment:


Sustaining High Performance

The Tesla Model 3 retains very strong sales volume in California relative to previous quarters, despite Q1 regularly being the slowest quarter of the year for auto sales. Q1 saw 463,835 total auto sales of a projected 1.92 million, under 24% of the annual total. The Model 3 also had a strong sales push in the state in H2 2018 (38,619 sales), final reaching sufficient production volume to meet a backlog of long-standing demand from eager buyers. This allowed the Model 3 to take the #1 spot over the H2 2018 period.

Against this backdrop, to see Q1 2019 sales volume still retaining some 83% of sales volume (by quarter) seen in the H2 2018 rush is therefore a remarkable result. Furthermore, the Tesla Model 3 Standard Range and Standard Range Plus were not available for sale during Q1 2019, and neither was leasing available. With these demand levers coming into play from April and May 2019 onwards, we may be seeing the start of the Model 3 holding a long-term position inside the top 3 best sellers in California. This is despite having an average selling price around twice that of the other typical vehicles that surround it inside the top 5.

Image by Tesla

For a broader perspective, after several quarters on sale in the state, the Tesla Model 3 still took 3.4% of all of California’s auto sales in Q1, before the more affordable variants and leasing options were available. With these more accessible options becoming available, there’s every reason to expect sales to remain strong going forward, even with the gradual phaseout of federal tax credits.

Maintaining or (with leasing options) slightly growing this market share, the California sales figure may stabilize around 65,000–70,000 annual units or more. The total US auto market is hovering around 16–17 million units annually, over 8.5× the California market, so the longer term potential for a similar 3.4% market penetration would give ~560,000 Model 3 sales per year — although, EV adoption in the rest of the US market is growing at a much slower pace than in California.

Then there’s Europe. Europe is a similar to the US in overall auto market size, but sedans are a significantly larger segment there. Also, the total cost of ownership advantage of EVs over fossil alternatives is much more pronounced in Europe. The overall EV market is growing more strongly in Europe than in the US. Leasing options for the Tesla Model 3 have also yet to be made available in the region. Currently, shipping and import costs add around 12.5% to the Model 3’s relative price in Europe, whereas most competing models are locally produced. In the longer term, local production in a future European Gigafactory will enable Tesla to reduce costs and reduce the sale price of the Model 3, increasing its sales potential in the region.

It remains to be seen at what sales levels the Model 3 will stabilize in the longer term, but European market share is likely to be not far behind the California market share of 3.4% once lower pricing from local production is in place and leasing is offered. This could potentially translate to around 500,000 annual sales in the region in the long term.

Image by Tesla

Then there’s China, whose auto market is estimated to be around 23–24 million units this year. Local production in the Shanghai Gigafactory later this year or early next will allow Tesla to reduce shipping and import costs on the Model 3 in China, and thus reduce pricing. With the EV market booming in China, the market potential for the Tesla Model 3 is larger there than either the US or Europe.

Base Case Scenario

Whilst federal incentives are gradually diminishing in the US, state incentives in California and New York, amongst other states, may rise via some combination of tax credits or other rebates, or by removing sales tax on EVs (e.g., in New York).

In terms of 2019’s demand levels, with leasing and the Standard Range Plus variant now becoming available, possible minimum demand levels could be 60,000 Model 3s in California, another 100,000 in the rest of the US, then another 80,000–100,000 in Europe and 60,000–80,000 in China. This gives 300,000 to 340,000 total for 2019, likely as much or more than Tesla can produce in the year from its Fremont factory (which is reportedly at 6,000 to 7,000 per week).

Image by Jason Yang/youtube

Once local China production comes online at the end of this year or early next, the Model 3’s entry price in the country will quickly fall from today’s RMB 377,000 ($54,500) towards well under RMB 275,000 ($40,000), perhaps under RMB 240,000 ($35,000). When this cost reduction takes effect, China demand will likely triple to at least 180,000 units. Tesla may also begin to export the Shanghai-made Model 3 to local markets in Japan, South Korea, Taiwan, and elsewhere in the region, perhaps including India. This ramp of demand will exercise the Shanghai factory’s interim target volume of 250,000 annual units (even before the Model Y starts production).

Overall, Tesla’s longer term target of between 500,000 up to 700,000 or 800,000 Model 3s annually (that range depending on the broader economy) seems like a reasonable demand estimate, not an overly bullish one.

Tesla Model Y

Finally, there’s the upcoming Model Y, which will be produced from late 2020 in both the US and China, and ultimately in Europe as well. It will be built on the same process as the Model 3, with around 76% of parts being the same, and without adding significant complexity. Translating the manufacturing process of the Model 3 to the Model Y will not suffer the over-ambitions of the Model S to Model X transition. In essence, there’s every reason to expect a smooth production ramp of the Model Y.

The SUV segment in the US is over twice the size of the sedan segment, giving the Model Y demand twice the potential of the Model 3 demand in California and the rest of the nation. This then would translate into 130,000–140,000 annual unit sales in California alone. Overall, Tesla believes the Model Y has global potential to sell 1.5× or 2× the volume of the Model 3, giving an annual base demand case of 750,000 units, up to more than a million units.

Image by Tesla

If you spot anything unrealistic (either high or low) in this assessment, please give your reasoned argument in the comments section.


Tesla Model 3 = 3rd Best Selling Vehicle In California In 1st Quarter

Tesla Model 3 = #1 Best Selling Car In USA In Terms Of Revenue (4th Quarter 2018)

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