Tesla's Success in Context

Last month a blogger at Green Car Reports noticed that Tesla had sold more of its Model S cars in the first quarter of 2013 than Audi, BMW and Mercedes had sold of their top models over the same time period. That’s true but also very misleading.

The story of Tesla’s apparent triumph took off when CNN Money turned the report into this nifty graphic:

This gives the impression that Tesla is crushing the competition. Indeed they appear to be selling more cars than BMW and Audi combined. But the comparison is misleading in ways that aren’t immediately obvious.

The Tesla Model S is one sedan with 3 different battery options. The base Model S with a 60kwh battery starts at $62,400. The upgraded Model S with an 80kwh battery (longer range) starts at $72,400 and the Model S Peformance starts at $87,400. That’s a $25,000 price range.

What the Green Car Blog and CNN Money (and everyone who followed their lead) have done is compare a car that covers a $25,000 range of prices to a single competing model from each manufacturer. For instance, the Audi A8 has an MSRP of $73,095. So it’s on par with the 80kwh Model S but $10,000 more expensive than the 60kwh Model S.

Audi has other cars closer in price to the low-end Model S and some of those sell pretty well. For instance, the Audi A7 has an MSRP of $60,995. Not surprisingly, Audi sells more of them every month than it sells of the A8. In fact, in the same quarter in which Audi sold 1,462 A8s, it sold 2,083 of the A7 (about 24% of which were sales of the more expensive S7, MSRP $85,295).

Audi also offers the S6 at an MSRP of $72,795. That’s right in the middle of the Tesla Model S range and it’s a fast sports sedan, meaning people looking at the Model S might also be considering an S6. S6 sales are lumped in with A6 sales but they amount to roughly 12% of A6 total. That means Audi sold roughly 525 of the S6 cars (which are faster than the Model S) in the first quarter.

If you add all these up, you find that Audi sold about 4,070 sports sedans in the $60-$85k range (6 different models: S6, A7, S7, A8, A8L and S8) vs. the 4,750 claimed by Tesla. I’m leaving out sales of the Audi RS5 (MSRP $69,795) because Audi’s sales figures don’t offer a breakdown of those sales. While it’s a coupe, the RS5 is a 4-seater in the price range of a Model S. If you add those sales in there would not be more than a few hundred cars difference.

You can do the same thing with sales from the other manufacturers. BMW sold 2,338 7-series sedans in the US in the first quarter. But what about sales of the 6-series coupes (MSRP $75,825), the M5 sedan (MSRP $87,233), the M3 coupe (MSRP $62,325). Add those up and BMW sold in the neighborhood of 6,000 cars over the same time period. (Note: M Series sales are not available for 2013 but this report from 2010 says they sold 6,821 M cars in the US in 2010. Divide that by 4 and you get a rough idea of quarterly sales). Granted some of those Beemers are coupes not sedans but is it really a stretch to think someone looking at the low end Model S might also consider a BMW M3 at around the same price point?

The Tesla sales comparison to Mercedes is the biggest stretch of all. First off, the S-Class sedan has a much higher MSRP ($93,255) than any version of the Model S. And if we add in sales of the CLS-Class (MSRP $73,025)–which totaled 1,695 cars over the same quarter–we get 4,772 sales, slightly more than the Model S despite the higher price average. And that comparison generously assumes that someone looking at the top-of-the-line Model S Performance would not also glance at the $106k Mercedes SL (1,484 sold in the 1st quarter).

It just isn’t true that Tesla is crushing the German competition. They may be outselling individual models but in the overall price range they are (just barely) outselling Audi and still lagging behind more expensive cars from Mercedes. And don’t forget Tesla’s sales have the government’s wind at their back. Uncle Sam kicks in $7,500 toward every Tesla purchase (prices above are after this is deducted). If BMW or Audi could offer the same incentive off their top models, I have no doubt their sales would surge.

Finally, it should be noted that Tesla is working through a 2-year backlog of orders. Earlier this month the company stopped publishing figures on new purchase reservations. This might suggests demand for the cars is fading (or it might not). Only time will tell.

Whether they are eating the German manufacturer’s lunch or not, Tesla is definitely competing with the big boys. If they follow through on their “secret” master plan and offer a great new model at half the price of the Model S, one that sells comparable numbers to BMW in that less rarefied segment of the market, they will be a force to be reckoned with. Given that Tesla is an American car company, that’s a good thing. I might even be starting to root for them a little bit.

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