Forecasting Tesla Model 3 sales in 2019

Tesla’s Model 3 has quickly conquered the luxury car segment. In its first year on the market, the new EV sold an estimated 138,000 units in the US, beating out the Lexus RX, which sold 111,641 units, and sailing past the BMW 3 and 4 series, which sold 75,957 vehicles. 

Above: Tesla delivers its Model 3 to a happy family in Europe (Twitter: Tesla)

Numerous writers in the popular press, including Niall McCarthy (Forbes) and Peter Valdés-Dapena (CNN Business) lauded the company’s achievement, and noted that it’s especially impressive considering that Tesla has no traditional dealers, and does no advertising, and that currently available variants of Model 3 are pricey even by luxury standards, with a starting price that’s now at $42,900.

Tesla is on a serious roll - it sold almost as many cars in 2018 as it sold in all the years since its founding in 2003. The big question now is, will this level of Model 3 demand hold up? There are several reasons to believe that it will.

Model 3 deliveries are just beginning in Europe and China. There are an estimated 100,000 reservations outstanding in Europe, which should be enough to keep the party going for some time. And there are plenty of US reservation holders still waiting for their promised $35,000 Model 3, which Tesla hopes to deliver in four to six months.

Above: Tesla Model 3 ranked higher than all other luxury cars and SUVs in the US in 2018 (Source: Forbes via Statista)

Audi plans to start delivering its new e-tron in Europe in March, and the Porsche Taycan is expected to arrive later this year. While superficial observers see these new entrants as a threat to Tesla, EV cognoscenti tend to take the opposite view. Pure electric vehicles made up just 1.2% of all vehicle sales in the US last year, according to Edmunds. The potential market is enormous, and as more automakers start publicizing their electric models, consumer awareness can only grow. For Elon Musk’s part, he’s been practically begging the legacy automakers to start getting serious about electrification.

In Tesla’s fourth-quarter shareholder letter, the company said it expects to deliver between 360,000 and 400,000 vehicles in 2019, which would be an increase of 45% to 65% compared to 2018.

Is this a realistic forecast? Daniel Sparks, writing in The Motley Fool, believes Tesla is “approaching its guidance conservatively this time.” Reaching the midpoint of the forecast range wouldn’t require a significant increase in the rate of production - to deliver 364,000 vehicles in 2019, the company only needs to maintain the rate of deliveries it achieved in Q4 2018.

Above: Model 3 fleet ready for deliveries near Xingang Port, Tianjin, China (Twitter: Jay in Shanghai via 李大锤同学微博)

Sparks also believes the demand is “almost certainly” there, considering the gathering momentum in Europe and China. If Tesla can get the $35,000 version of Model 3 on the road, it will be able to reach “a much broader customer base,” enabling it to meet or exceed its high-end goal of 400,000 vehicles in 2019.

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Written by: Charles Morris