Mon. Jun 24th, 2019

Teslas are selling well, if you consider them luxury cars

Teslas are selling well, if you consider them luxury cars

But not if you compare them to the mass-market cars Tesla wants to sell.

Tesla delivered a disappointing 63,000 cars last quarter, 31 percent less than it had the quarter before. The miss sent the stock down about 8 percent. Obviously, a decline in sales is not great, but Tesla’s current success depends a lot on how you look at the company.

Tesla’s sales are a drop in the bucket compared to major car producers. In North America alone, Toyota sold nearly as many cars in the last month of 2018 as Tesla sold globally the whole year. Last quarter, Ford sold more than nine times as many vehicles in the US than Tesla did worldwide.

At the same time, Tesla’s Model 3 was the best-selling luxury car last year according to Car and Driver, having sold 138,000 units. No. 2 was the Lexus RX, which sold 112,000 units . (For context, the best-selling mainstream vehicle was the Ford F-series truck, which sold more than 900,000.)

Car and Driver doesn’t have set parameters for what defines a luxury car. “Many factors go into deciding whether a vehicle is a ‘luxury car,’ including the brand, price, materials, purpose, tech, how the automakers define their vehicles, etc. So there isn’t one exact answer,” a company spokesperson told Recode. “Plus, as automakers regularly update their products, the deciding factors shift, too.”

The Model 3, despite not really having all the creature comforts of a luxury car, is still very much a luxury car in price and perception.

Only this year did Tesla finally deliver the long-awaited mass-market $35,000 Model 3. Even at that price, it’s more than the average new vehicle. Thanks to upgrades, the average selling price has been nearer to $60,000.

In March, Tesla announced its next vehicle, the Model Y, a much needed “affordable” SUV. Like the Model 3, more expensive versions of the Model Y will be released first and even its base price is pretty high at $39,000.

Tesla vehicle prices compared to the national average

Tesla CEO Elon Musk in his last earnings call predicted a demand of more than 500,000 Model 3s in 2019 and expects demand for Model Y, which won’t come out until fall of next year, to be 50 percent to 100 percent higher than that. In the latest report, Tesla reaffirmed its guidance of 360,000 to 400,000 2019 vehicle deliveries. That goal is going to be harder now that it’s missed first-quarter expectations.

But if Tesla hits those estimates, that would put its vehicles in best-selling car, not just luxury car, territory.

Musk knows he needs to get prices down to get there:

“The demand for Model 3 is insanely high,” Musk told investors last quarter. “The inhibitor is affordability. It’s just like people literally don’t have the money to buy the car. It’s got nothing to do with desire. They just don’t have enough money in their bank account. If the car can be made more affordable, the demand is extraordinary.”

But for Tesla optimists, this all fits in with Tesla’s master plan, which Musk laid out 13 years ago.

“[O]ur long-term plan is to build a wide range of models, including affordably priced family cars,” Musk wrote at the time. He itemized the approach in steps: “Build sports car. Use that money to build an affordable car. Use that money to build an even more affordable car.”

Despite that demand, Tesla noted in its latest report that production outpaced deliveries by 22 percent. Tesla said that was due to “challenges encountered for the first time” from a “massive increase” in orders from Europe and China.

All the demand in the world won’t matter if Tesla fails to produce and deliver its vehicles.

Source: https://www.recode.net/2019/4/4/18295243/tesla-sales-luxury-q1-2019-model-3

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