Tesla Model 3 Sales Dominate Midsize Luxury Market Despite Phaseout of US Tax Credits

Tesla Model 3 sales still dominated the midsize luxury market in the United States in the latter end of 2019 despite the phaseout of tax credits. Tesla Bull James Stephenson released a graph recently which compared midsize premium sedan sales in the U.S., particularly the Model 3 and its competitors from BMW, Jaguar, Lexus, and Mercedes. The results may not be a surprise to avid supporters of the innovative EV automaker, but was probably a little shocking to TSLAQ and Tesla skeptics. 

Based on data aggregated by Stephenson, Model 3 sales started rising around October 2018. It remained steady, only decreasing bit by bit for the rest of the year. Around the same time, a decrease in sales can be seen for the BMW 3-Series, Jaguar XE, Lexus IS, and Mercedes-Benz. The sales dip in 2018 for Tesla’s competitors in the midsize premium sedan market almost mimics the positive sales of the Model 3 in Stephenson’s graph. 

Well, if you had any doubts, you can stop worrying about how the @Tesla Model 3 is selling in the U.S. vs. competing midsize luxury sedans.

It's just complete domination.@elonmusk $TSLA $TSLAQ pic.twitter.com/Mb8Xj4oPHT

— James Stephenson (@ICannot_Enough) January 11, 2020

The sales records for Tesla’s affordable all-electric sedan dipped significantly between February and March 2019. During this time, its competitors' sales increased, reversing the mirror image it had in the last quarter of 2018. 

The massive decrease in Model 3 sales could be a result of delayed shipments to Europe and challenges with its China ramp around the same time. During this time, Tesla ended up shipping Model 3s to China with incorrect stickers, causing delays in handovers as the company worked with regulators. Tesla also had to pay a $900 million bond in March 2019. 

After a tumultuous Q1, Tesla worked its way back up to increase Model 3 sales. By Q2 2019, Model 3 sales were steady again. Unfortunately, the same couldn’t be said about TSLA stocks at the time, particularly after Tesla ended up raising capital in May.  

Around the same time in Q2, TSLA bears believed that demand for the Model 3 would significantly decline due to the impending expiration of U.S. tax credits for Tesla’s all-electric vehicles by the end of 2019. At that time, Model 3 incentives were slated to be further reduced from US$3,750 to US$1,985 by July 2019, reported the Wall Street Journal. To stay ahead of the game, Tesla announced the release of its US$35K Model 3 in late February 2019. 

At one point, Tesla had six Model 3 variants for sale in 2019: 

• Standard Range RWD ($35K) and 220 miles of range. This variant was sold off-menu and needed to be ordered through one of Tesla’s physical stores.
• Standard Range Plus RWD ($37K) with 250 miles of range.
• Mid Range RWD (US$46K) with 264 miles of range.
• Long Range RWD (US$43K) with 310 miles of range.
• Long-Range Dual Motor AWD ($47K) with 310 miles of range. 
• Model 3 Performance (about US$58K) with the ability to do 0-60 mph in 3.2 seconds, 310 miles of range, and Track Mode.

Model 3s now available

Standard Range: 220mi, $35k
Standard Range Plus: 240mi, $37k
Mid Range: 264mi, $40k
Long Range: 325mi, $43k
Long Range AWD: 310mi, $47k
Performance AWD: 310mi, $58k, 0-60 mph in 3.2s!
https://t.co/RNnGdonjSr

(prices before incentives)

— Tesla (@Tesla) March 1, 2019

The prices for the six Model 3 variants were quite close and may have made it difficult for customers to decide which version they would purchase. At the time, Tesla seemed to be figuring out which variants would satisfy customers the most and which price points would be both beneficial to the company and to the future Model 3 owner. 

The finally settled on four variants, which are still available for sale today: 

• Standard Range RWD ($35K), which is still offered off-menu.
• Standard Range Plus RWD ($39.9K), which is popular in the United States and Europe, and which Gigafactory 3 in Shanghai has started to produce.
• Long-Range Dual Motor AWD ($48.9K) with an increased range of 322 miles. Now this version can be upgraded with Acceleration Boost, allowing it to do 0-60mph in about 3.5 seconds, based on Brooks from DragTimes.
• Model 3 Performance (about US$58K) with a 0-60 mph time of 3.2 seconds and Track Mode. 

Now all the variants come standard with Autopilot—even the MIC Model 3 produced in Gigafactory 3 Shanghai. Stephenson’s graph cuts abruptly at the end of December 2019, just when Model 3 sales were beginning to rise again in the United States. 

Model 3 sales haven’t quite reached that same peak it did in October 2018. However, Tesla’s global sales for its affordable midsize premium sedan may just be starting. 

Sales for the Model 3 hit record-highs in the Netherlands in December 2019. More of Tesla’s vehicles—in general—may be in demand in Europe because of stricter zero-carbon emissions laws in the region. Meanwhile, Tesla China just started ramping sales for its MIC Model 3. 

The real competition for the Model 3 in 2020 and 2021 would probably be the Model Y, Tesla’s upcoming SUV. Elon Musk has stated that the Model Y could sell more than the Models S, 3, and X combines. As such, the all-electric SUV’s impact on Model 3 sales could be quite significant. Or, the Model Y may end up co-existing with the Model 3 the way the Model X co-existed with the Model S. If this were to happen, then the auto industry's disruption from Tesla my very well just be the beginning. 

Featured Image Credit: Megan Gale Adams/Twitter