What's the problem for Tesla? It's Volkswagen. VW's ID.3 has been an extraordinary success in Europe and has knocked Tesla'sTSLA business for a loop. With VW’s launch of the ID.4 in China—start of ID.4 production at both of VW’s Chinese JV facilities occurred two weeks ago and the consumer launch event for both the ID.4 X and ID. 4 CROZZ models occurred last Tuesday—Tesla's era of BEV dominance in that country is over.
SEAL BEACH, CA - AUGUST 15: A damaged Tesla sits on a tow truck after a collision in the HOV lane on ... [+]
According to the CPCA, Tesla sold 12,103 Model 3s in October against a market for BEVs (pure electrics, I exclude hybrids since Tesla does not make them) that totaled 121,000. That 10% market share puts Tesla in fourth place behind SAIC-GM-Wuling, BYD, and SAIC's own brand, and also puts Tesla behind the combined sales of the "start-ups" Li Auto, WM Motors, Xpeng and NIO, which totaled a combined 14,800 units in October.
In May, by contrast, Tesla delivered 11.362 units in China according to the CPCA, representing 17.3% of the monthly total of 65,728 BEV deliveries in China. Tesla has been able to maintain monthly deliveries in the 10,000-12,000 unit range, but that is well short of the company's published capacity of 250,,000 units annually in China (or 21,000 per month.) and clearly the competition is eating into Tesla’s market share. The upcoming launch of the made-in-China Model Y will help, but with a starting price of RMB 275,000 (after subsidy,) that is a VERY expensive vehicle for what is, by Western standards, still a poor country.
Tesla's year-to-date sales of made-in-China Model 3s now total 94,000. That's a solid performance from a base of zero in December 2019, but it is well short of bullish Wall Street projections. As a lifetime car analyst I refuse to publicize the names of the feckless buffoons who "follow" the stock, but one notably clueless analyst stated on CNBC that Tesla is going to sell 150,000 made in China Model 3s in 2020. Huh? How does one get from 94,000 through 10 months to 150,000 for a full year? Santa Claus?
So, the simple fact is that Tesla has zero chance of delivering 500,000 cars in 2020. Musk reiterated a target of half a million units on Tesla's recent quarterly conference call, but that's what it was: a target. A good analyst constantly updates models based on new data, and the October data for Tesla was underwhelming in China and shockingly low in important ‘green” car markets like the Netherlands and Norway. Also, after raising hopes with a +3,000 unit month in Germany in September, that once again turned out to be end-of-quarter channel-stuffing as Tesla delivered a minuscule 252 units in October—fewer than Tesla delivered in October 2019—in Europe's largest car market.
Where's the beef? Where is the customer enthusiasm for the now 3.5-year-old Model 3? It doesn't exist. VW's ID.3 is the new kid in town and is absolutely destroying Tesla's sales base in Europe. The ID.3’s SUV cousin, the ID.4, is now on the ground in China with first U.S. deliveries expected by year-end.
I don't think VW's ID.4 will decimate Tesla's Model 3 sales in the U.S. the way that the ID.3 has in Europe, but Tesla now has real competition for the first time in the domestic BEV space. So, expect even further price cuts from Tesla on the now past-its-prime Model 3, and look for the company to attempt to regain lost share with the Model Y. That will be difficult since, to my trained eye, the 3 and Y are very, very similar in appearance. There has to be some separation among models to build a global product line.
Tesla's lack of exterior styling differentiation (Cybertruck could help there) is hindering Musk's dreams of world domination. Add to that the company's horrible execution in terms of initial quality—as the recent recall of Fremont-built Models S in X in China once again demonstrated—and this company lacks what it takes to maintain sales for a global car company: a brand.
The "woke" folks in California will continue to use hefty tax credits to buy Teslas, but what about the folks in Shanghai and Lillehammer? Their eyes are being tempted both by an established giant (VW first started making cars in China in 1985) and plucky start-ups like NIO, and that is not good for Elon.
Every bull case on Tesla is based on the company continuing to take share from "legacy" automakers, but those feckless buffoons that "follow'" Tesla are missing the widely available sales data from Europe that show that Tesla is getting its butt kicked by one of those very “legacy” automakers. This is NOT an availability issue. The Chinese government hyped the fact that in late October Tesla exported 7,000 made-in-China Model 3s to Europe, but only a true Musk-lover would think that these ships will carry a silver bullet for Tesla sales when they hit European shores later this month. Those ships are carrying low-end SR+ models that will only serve to dilute Tesla's brand ahead of the European launch of a premium model, the Model Y.
So, the wheel will keep on turning, and obviously Tesla's home market is the real prize for global OEMs. Pre-orders for VW'S ID.4 1st Edition model in the U.S. are still unavailable, as that option has been grayed out on VW's website since the first day of pre-order availability. In the absence of the ability to do real research, analysts have in the past used such technical, web-based details to justify unfounded demand expectations that, in turn, are used to justify Tesla's ridiculous valuation. So, until proven otherwise, I will believe that U.S. demand for VW’s ID.4 is quite strong, just as has been the case with the ID.3 in Europe.
Though Tesla continues to generate more than 100% of its net profits from selling ZEV credits to other automakers, it generates those credits by selling cars to the consumer. Tesla's abysmal build quality and infamously poor customer service put them behind the global leader in car sales, Volkswagen. It has happened in Europe, is about to happen in China and will happen soon in the U.S. This will be obvious to Tesla followers, even the analysts, as 2020 turns into 2021.
