Tesla Model 3 European Sales Threaten More German Profits

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Tesla Model 3 (AP Photo/Justin Pritchard)


Tesla has been feasting on the profits of the big German carmakers’ European luxury portfolio with its Model S sedan and Model X SUV, but its assault on Europe is about to hit high gear as sales of the smaller all-electric Tesla Model 3 get underway here.

The likes of BMW, Mercedes, Audi, and Porsche and not forgetting Indian-owned and British-based Jaguar Land Rover (JLR), have been feebly-slow in ratcheting up their electric portfolios compared with Tesla. But the Model 3 mid-sized sedan also threatens high-end gasoline-powered mid-size vehicles with massive profit margins like the BMW 3 series, Audi A4, Mercedes C class and Jaguar XE, as European early adopters and rich virtue-signallers swarm all over the Model 3. No matter Tesla’s record on service and worrying residual values, the Model 3 is certain to be a must-have vehicle in Europe, initially at least.

Forecasters are a bit fearful of predicting Model 3 sales, not least because Tesla doesn’t cooperate with consultancies as regular car manufacturers do, to hint at the future plans.

But Professor Ferdinand Dudenhoeffer, director of the Center for Automotive Research (CAR) at the University of Duisburg-Essen in Germany reckons the Model 3 will be a big hit and soon.

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Tesla Model Y SUV Photographer: Patrick T. Fallon/Bloomberg


Dudenhoeffer said he expects 80,000 Model 3 sales in Europe this year, although he has reined in his initial forecast of 100,000 made late last year.

“In 2018 we had 200,000 battery electric vehicle sales in Europe, and in 2019 we expect this to surge about 35% to 275,000. If the Model 3 could hit 80,000 sales, that would give it an instant market share of nearly 30%,” Dudenhoeffer said.

Felipe Munoz, global automotive analyst at JATO Dynamics, said the Model 3 will be a big success initially, but the duration of its supremacy depends on how quickly the opposition, mainly German, can crank up their electric car output.

“(The Tesla Model 3) is expected to lead the EV rankings: it has no direct rivals, and it is an interesting car that features good technology and appealing design and is not very expensive. Therefore, its main impact will depend on how fast the German premiums, Volvo and JLR react to the arrival of this car to Europe: how fast are they going to bring their own midsize electric cars,” Munoz said.

The fact that it is a sedan and not an SUV won’t help its cause.

“Even if it doesn’t have direct rivals yet – Volvo’s Polestar 2 is the closest but is due to arrive in 2020 – it will have to deal with the midsize electric SUVs like the Jaguar I-Pace, Audi E-Tron, and Mercedes EQC. The EV market is not exempt from the “SUVubization” of the industry. Although the SUVs are a bit more expensive, the trend now indicates that the hot-selling vehicles are SUVs and not sedans,” Munoz said.

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Volvo Polestar electric vehicle Photographer: Qilai Shen/Bloomberg


Tesla’s SUV version of the Model 3, the Model Y, won’t go on sale in the U.S. until 2021, so its arrival in Europe isn’t imminent.

Model 3 sales started in Germany, Switzerland, and Norway in February with a version costing $72,000 with a long-range battery pack. The Performance version with two electric motors and four-wheel drive will also be available.

According to http://carsalesbase.com, some really eager early adopters managed to acquire 67 Model 3s in January. It hasn’t yet compiled the European sales results for February. In 2018 Tesla sales in Europe totaled 29,614 compared with its U.S. sales of 191,627, according to carsalesbase.

IHS Markit analyst Tim Urquhart said Tesla will roll-out the higher end versions first then move down in price, and doesn’t see much impact on German small gasoline sedans like the BMW 3-Series. German electric vehicles may start to reach the market towards the end of this year.

“I suppose the Model 3’s success depends on how much you want to be seen in one. After reports of Tesla sales service and aftercare, you’d have to be pretty committed to buy one. Yes, there will be early adopters, but how many of these are there; we’ll find out in the next 12 months,”Urquhart said.