Monday, June 11, 2018

Tesla Model 3 on Verge of Dramatically Disrupting Mercedes, BMW, & Audi

2018-Predicted-Monthly-Average-Sales-Chart (Credit: & Click to Enlarge.
As the Tesla Model 3 gains significant production volume, with most of the 2018 deliveries going to US customers, other players in the US small and midsize luxury car segment look set to see their sales halved in Q3 and Q4.

Tesla pointed to this emerging trend in its Q1 2018 Update letter, graphing Tesla’s growing sales relative to longtime leaders such as the BMW 3 and 4 series, the Mercedes-Benz C-Class and CLS, and Audi’s A4 & A5 offerings.  As the model 3 ramp is now gaining traction, with estimated US sales in May of 9,000 vehicles (despite many units being diverted to Canada), the impact on segment competitors will soon be felt in earnest.  Tesla has indicated that it will be almost exclusively selling the Model 3 cars it produces to the US market in Q3 and Q4 of this year, at volumes approaching 21,600 units per month (5,000/week) from late July or August onwards, perhaps pushing even higher in Q4.

Zach did a US sales volume comparison a few weeks ago, charting the inexorable rise of the Model 3 relative to its likely competition.  Here, I take a look at how the sales of longtime leaders of the segment may be affected by the rise of the Model 3.  The piece is also to remind ourselves what the German luxury brands have done, if anything, to prepare for this car.  As a side note, vehicle classifications and segments are an imperfect art, and EVs muddy the water further by offering more interior space than combustion vehicles of the same external size (both these metrics often being used for segment classification).  Electric cars are also inherently more “luxurious” and “refined” (quieter, smoother power delivery, lower center of gravity, etc.).  Regardless, most observers agree with Tesla about which established vehicles the Model 3 is most keenly going to be competing with in the US market.

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