In this video I’ll address whether I think Tesla has a demand problem.
Tesla recently completed sales of their vehicles in Q2 2019.
To many people’s delight they exceeded mosts expectations and were right in line with where they stated they would be in their Q1 2019 letter.
Still, critics are stating Tesla still has a demand problem but what does the data say?
There are three ways that I look at Tesla’s growth: QoQ, YoY, and seasonal. Let’s drill down into each of these.
Do sales consistently dip around the same time every month, year, quarter.
Aside from drop YoY drop in S/X sales Q2 was a very nice quarter for sales.
So, where does this ‘no demand’ claim come from?
It appears it came from the huge MoM drop from Q4 2018 to Q1 2019.
Critics associated the huge drop with the $7,500 US federal tax credit cutting in half at the end of 2018. They surmised that that only reason people were buying Teslas were because of the tax credit - completely ignoring all of the other selling points.
Though the tax credit may have played a significant role in pulling sales from 2019 into the last month of 2018, Tesla also made some significant changes to S/X at the beginning of this year that could have significantly impacted sales.
The primary change resulted in them removing the least expensive 75 kWh battery pack and only offering the higher priced 100 kWh options in early January. Later on in the quarter they eventually reintroduced a smaller range S/X in the new vernacular similar to Model 3, Standard Range and Long Range. These changes caused a drop in average sales per quarter from ~25,000 units in 2018 to ~15,000 units in 2019.
This change had a pretty significant impact global sales:
Despite Elon Musk’s most recent reaffirmation that there are no plans to do a “refreshed” S/X, I do think it makes sense to continue to bring them more in line with Model 3’s feature suite - a horizontal center display, updated HVAV, and battery architecture to facilitate 250 kW charging speeds.
Model 3 growth on the other hand follows a different trend
To get back to the original question, does Tesla have a demand issue? The Model 3 - absolutely not. Model 3 sales continue to grow and they’ve only just started delivering vehicles ousted of North America. The Model S/X - it appears the data indicates there could be a demand. It could also indicate that 15,000 units per quarter is the new norm now that a lower priced Tesla is available.
So far Tesla has sold slightly more than 158,000 vehicles this year. If Tesla is to reach their low-end goal of 360,000, they need to to sell an average of 100,900 vehicles in Q3 and Q4. 5,000 more vehicles per quarter than Q2, something that appears to be within reach.
The question is: Is Tesla’s current Model S, X, and 3 offering convincing enough to consumers to sell 360,000 vehicles in 2019?