Last month the media speculated that the Tesla Model 3 could become the #5 best-selling car in the United States for the month of August. That came true when Tesla sold more than 20,000 cars last month (20,450), coming in behind the Big Four: Toyota Camry (30,141), Honda Civic (27,677), Honda Accord (26,725), and Toyota Corolla (26,155.)
“If our assumption for Q3 turns out to be as accurate as it was for Q2, then we’re looking at an easy 20,000 deliveries for August. Assuming the August figures for the other cars hold steady, that will put the Model 3 at the #5 spot for the month.” – 1redDrop: Aug 18, 2018.
The question now is, can Tesla break into the elite Top 4 best-sellers in the U.S. this month?
September didn’t really get off to a good start on the production side. Paint issues as well as unknown factors seem to have slowed down Model 3 production to under 5,000 cars a week.
But there are a couple of things to keep in mind:
First of all, comparing Model 3 sales with those of more mature models from other carmakers isn’t entirely fair. That’s because Tesla is merely fulfilling reservations at this point. The car is hugely popular, no doubt, but doing a monthly sales comparison requires bearing this in mind.
Second, Tesla’s Model 3 sales follow monthly production volumes. The only bottlenecks between production and delivery are logistics and quality control. Therefore, if production goes up, sales/deliveries will naturally go up because there’s still a huge backlog of reservations. That’s not the case with Toyota and Honda’s top-selling models. Those sales levels are based on current demand and are sustainable. We don’t yet know the sustainability of Tesla Model 3 sales or demand. Musk recently said they were getting 5,000 net new orders a week, but we won’t see anything in paper until Q3 results are out. And that’s several weeks away.
That brings us to the third consideration. Can the Model 3 keep selling at this level after reservations are fulfilled over the next year or so? And that’s contingent on Tesla achieving a production level of 10,000 Model 3s a week. If they do that early next year, as is the revised timeline, the annual output will be more than 500,000 units. Only then will we be able to see whether the current sales levels are sustainable because there won’t be any reservations to fall back on.
So, while it’s certainly impressive to have the Model 3 in the Top 5 for August, we have to maintain a balanced view of the situation. It’s quite possible that if production volume increases in September (over August and July), Model 3 sales figures will break into the Top 4 in the U.S. But that will be under the special circumstances we talked about – not an apples to apples comparison with Toyota and Honda sales.
If Tesla does into the elite Top 4 best selling cars in the U.S. in September, it will be because of a combination of things:
- Production will have to ramp to 26,000+ cars, which is about 6,000 cars a week average.
- Paint, quality and other bottlenecks have to be sorted out very soon if production targets of 6,000+ Model 3s a week are to be met.
- Deliveries will have to speed up; Tesla is already seeing success in the “Sign and Drive” initiative:
“With the introduction of the “Sign and Drive” program, the company has cut delivery time per car to about five minutes. Dealership walkthroughs have been replaced with an email containing video tutorials.”
All of these elements have to align if Tesla wants to see the Model 3 in the top 4 best-selling cars list for September, 2018.
