Published on November 2nd, 2019 | by Vijay Govindan0
Tesla Model 3 Revenue Laps USA Small & Midsize Luxury Competitors — Q3 2019 CleanTechnica Report
November 2nd, 2019 by Vijay Govindan
As you’ll see in this article, Tesla Model 3 revenue dwarfed its luxury car competition in the 3rd quarter, and also placed it #3 among all sedans sold on the US market. Wall Street’s interpretation: “Tesla Model 3 is a failure. As ivory tower Wall Street analysts, we expected Model 3 luxury revenue to be double the revenue of any other sedan at this time.” Many auto industry execs are surprised the Model 3 placed so high since they thought Tesla would be bankrupt by now. Not quite.
Recently, CleanTechnica posted a piece on the top 10 sedans in the US in terms of unit sales. I was asked to create a Q3 2019 revenue chart. To do so requires assumptions about average selling price since Tesla does not share that information.
Here are the assumptions I made for the average price of each vehicle: We estimated Tesla Model 3 sales to be 60% LR (Longe Range) and 40% SR (Standard Range). I chose the middle model offered for each of the competitors and used MSRP.
We can see the Model 3 is #3 in revenue for the top 10 best selling cars in the USA! If you look higher up, you can see we have the Model 3 at #6 in unit sales. The superior price and revenue of the Model 3, however, allowed it to leapfrog much cheaper competitors.
I expect Q4 sales of the Model 3 to dip in the USA, as more will be sent overseas if recent ships coming to SFO are a guide. We’ll see.
Putting the car in its actual class, the Model 3 did exceptionally well against the luxury sedan competition, where it was clearly the highest selling (in terms of unit sales) model in or near its class.
The Model 3 estimated average selling price is in the middle of the pack on this one. No advantage here. But in this case, volume sales boosted the Model 3 far into the revenue lead.
The above graph is to scale. Due to the superior sales of the Model 3 and a similar price to the other models, the Model 3 revenue laps competitors. How much does it lap competitors? More than 7× as much when compared to the Acura TLX revenue. Or “just” 2–6× more than the other models.
For a car introduced just over 2 years ago, the leap to the top of the podium in this category is dramatic in speed and impact.
Tesla is capacity constrained, but with the launch of Gigafactory 3 (GF3) in Shanghai, Tesla can shift some Fremont production to satisfy more USA, Europe, and Australia Model 3 demand. We have heard from the Q3 conference call that Tesla is also working to increase Model 3 production at Fremont. I don’t expect the number diverted to the USA to increase too much. The future of the EV market is China, and the Chinese are hungry to purchase local Model 3’s. We will see a shift to more USA deliveries when the European gigafactory (GF4) comes online.
We may not see the Model 3 overtake Toyota Camry revenue again any time soon. However, it has the potential to stick in the top 5 best selling cars by revenue for the next few years.
Every quarter the Model 3 is in the top 10, it’s a punch to the face to the slow, gasoline competition. Their only saving grace is Tesla doesn’t have more capacity (yet). With self-funding being very close, it’s just a matter of time.
On the small & midsize luxury sedan market, the race is over. None of the other makes will ever sell in the volume necessary to challenge Tesla’s revenue. This is an embarrassing defeat for everyone in this market. Most industry players expected Tesla to go bankrupt, not be #1 in small & midsize luxury sales. They have given Tesla a 10 year head start and Tesla is doing what it can to take advantage.
The Tesla Model Y, as we have written previously on CleanTechnica, will bring widespread value destruction to the small & midsize luxury CUV market, similar to what its Model 3 sibling has done in its segment. Luxury sales will go down, used luxury vehicles that are not a Tesla will depreciate faster due to the Tesla effect, and I expect by 2021 the Model Y will force many competitors to exit the segment. They will be hit hard by an economic recession, EV competition, the Osborne effect, and full dealer lots. That’s a sucky situation for luxury auto manufacturers, one Tesla will be sure to exploit. If Elon is thinking 20 moves ahead, I would expect large-scale Model 3 capacity increases to be timed to when FSD is ready. That would be the checkered flag, with Tesla in the pole position.
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