The Model 3 Could Help Tesla Win The European Market

If Tesla (NASDAQ:TSLA) is to achieve its goal of becoming a truly global maker of Electric Vehicles (EVs), it will have to follow in the footsteps of traditional automakers which make most of their sales outside the U.S. Right now Tesla’s sales by geography exhibits an odd balance where close to 60% of sales come from the domestic market with the rest coming from all other global markets combined. In 2015, Tesla Motors sold 50,446 Model S vehicles. 58.9% of those sales were made in the U.S. with Europe contributing 35.7% sales. U.S sales grew 59.4% Y/Y in 2015, slightly faster than in Europe where sales grew 54.8% to 17,988 units. In sharp contrast, General Motors (NYSE:GM) sold 9.8M vehicles in 2015, with the U.S. sales coming in at 3.6M units, or 36.7% of total sales and the rest coming from other global markets.

This is not exactly a fair comparison since we are essentially comparing a single model vs. multiple models in different classes. But at least, it gives a general overview of how Tesla’s geographical sales differ widely from those of conventional automakers. Having multiple models to exploit different market segments and price points is, of course, one reason why companies like GM have been able to successfully exploit global markets.

However, this line of argument is only partly true since Model S has not been doing very well against higher-priced gasoline luxury cars in key markets such as the Mercedes-Benz S-Class sedan in Germany. BMW i3 an all-electric car outsold the Model S in the country by almost 30%, though BMW i3’s price tag of US$46,400 in Germany is considerably lower than Model S’ entry price of 70k. The German market is known to be notoriously hard to crack for foreign automakers since the country’s own luxury auto industry is highly developed.

Meanwhile, Norway remains Tesla’s second biggest international market after the U.S. Tesla sold 4,039 Model S units in the country in 2015, or 9.4% of total sales. This has a lot to do with the generous subsidies and perks that EV owners receive in the country, including free parking and charging, as well as driving on bus lanes. But sales in Norway appear to have hit a plateau since Tesla sold nearly the same number (1 less) of Model S units in Norway in 2015 compared to 2014 when it pushed 4,040 units.