Posted on April 05, 2016 by Matt Pressman
This weekend, Tesla Motors [NASDAQ: TSLA] CEO Elon Musk tweeted that Tesla Model 3 reservations surpassed 276,000. To provide perspective, the Wall Street Journal reported, "The figure is staggering... To give a sense on the scale of the backlog, BMW sold about 95,000 3-series sedans in 2015 in the U.S. The Model 3 is roughly the same size and price and would likely outsell the U.S.’s best-selling compact luxury car in its first year of production."
Above: Photo we shot when attending the Tesla Model 3 launch event
Wait... what? That's right, in just a few days, Tesla had booked enough U.S. reservations that it could (conceivably) surpass the best-selling BMW 3-series. We wanted to dig a bit deeper into the numbers to see if, in fact, this could happen downstream. It turns out that Siddhartha Dalal wrote a fascinating article for Seeking Alpha* that takes a closer look at the Tesla Model 3 within this ultra-competitive compact luxury car segment.
Source: Tesla Motors
Dalal notes that the flood of Tesla Model 3 reservations was comparable to the original Apple iPhone launch, "Just for comparison, over the first two days the original Apple iPhone sold 270,000 units. So [exceeding] 200,000 reservations for a $35,000 car to be delivered two years from now or more is an impressive feat by any measure." To clarify, this wasn't $600 for a phone you get right away, it was a $1000 reservation for a car you'd likely wait 18+ months for -- yes, quite a feat. That said, let's take a look at the chart Dalal uses to illustrate the Tesla Model 3 competitive landscape...
Source: Seeking Alpha* / Good Car Bad Car
From the data, Dalal extrapolates that: "The sales of the Model 3 will easily surpass all the competition. A few days ago even Audi admitted that Tesla has done everything right. Let's assume reservations slow down and they just double from the current number by the time the Model 3 launches. And let's say that Tesla takes two years to deliver these 400,000 orders. That's an average rate of 200,000/year in 2018 and 2019. And if this is split 50/50 US/International, we have 100,000/year in the US, which represents a 16% market share of the small luxury sedan market."
Once might argue that the Model 3 design language (see above) makes its German competitors look dated. However, aesthetics are a matter of personal taste, so looks aside, Dalal points out, "None of the competition has the autopilot safety features standard. As an example, to get the equivalent safety features on a BMW you would need to pay an extra $5,400 ($1,700 for their driver assist package which forces other packages on you). Mercedes will charge you at least $3,350 for the features. You are forced to get something more comparable (but in in my opinion still inferior) to the Tesla autopilot to get even the safety features... [and] none of the competition even has OTA [over-the-air software] updates."
And what about performance? Even BMW Blog admits, "Tesla Model 3 stands to threaten the automotive segment that’s been dominated by the BMW 3 Series, Audi A4 and Mercedes-Benz C Class for decades... [and the Tesla Model 3] will be able to get from 0-60 mph in under six seconds, as claimed by Musk. That performance figure rivals cars like the BMW 328i, Audi A4 and Cadillac ATS 2.0t." The article concludes, "when considering its claimed performance figures, and... at that price point and with that level of technology, BMW, Audi and Mercedes-Benz should be very nervous right now."
*Source: Seeking Alpha