Is Tesla Beating Automakers in the US?

Originally published on my TaaSMaster Newsletter.

How has Tesla performed in the U.S. versus the rest of the automotive industry? To assist with a reasonable answer, I compared car maker vehicle sales for calendar years 2021 and 2019. I chose 2019 versus 2020, to include the most recent sales year not impacted by the supply chain challenges still plaguing the industry today. Also, I eliminated pickup truck sales from my analysis. 2.8 million pickups were sold in the U.S. in 2021. Since Tesla does not yet sell a pickup, the scale of this segment skews any appropriate comparison to Tesla’s sales performance.

Tesla vehicle sales rose a dramatic 40.4% to 313,400 vehicles from 223,200 in 2019. Its most popular model in 2021, the Model Y, wasn’t available for sale in 2019. Yet, by the end of 2021, Model Y sales grew to 172,700 vehicles representing 55.1% of all Tesla vehicle sales.

Many believe Tesla competes with luxury brand automakers. With that assumption, how has the company performed versus the major luxury car makers in the US?

• Tesla: 40.4% growth; 313,400 total vehicles sold
• BWM sales increased 3.6% to 336,644 vehicles.
• Mercedes sales declined 7.9% to 329,574 vehicles.
• Lexus sales grew 2.1% to 304,475 vehicles.
• Audi sales dropped 12.5%, selling 196,038 vehicles in 2021.
• Acura sales were flat. The brand sold 157,408 vehicles.
• Cadillac sales dropped a substantial 24.3%, selling 118,331 vehicles in 2019.
• Ford’s Lincoln brand saw sales fall 22.5% to 86,788 vehicles.

Tesla seems destined to out-sell all of the luxury U.S. automakers this year.

From a total sales volume perspective, Tesla essentially matched the sales levels of BMW, Mercedes and Lexus in 2021 — the traditional top selling luxury automakers in the US. Interestingly, Tesla accomplished this while only offering four vehicles (two sedans and two SUVs). Comparatively, leading luxury automaker BWM offers seven SUVs, seven sedans, and two EVs in the U.S. market. BMW has fourteen vehicles to essentially sell the same quantity of vehicles that Tesla sold with only four models. What might be more troubling for these luxury automakers, Tesla now seems destined to out-sell all of the luxury brands this year given its growth trajectory. The idea of Tesla selling more vehicles in the U.S. than any of these legacy automakers was an unimaginable outcome as recently as 2018 when Tesla only sold 166,000 total cars.

Other luxury brands have fallen behind substantially to both Tesla and the other luxury brand leaders. Neither of the second tier luxury brands sold more than 200,000 vehicles in 2021, with Lincoln not even topping 100,000 cars. With the exception of Acura, all of these luxury automakers experienced significant sales reductions compared to 2019. Were these sales challenges caused by the supply chain issues such as the microchip shortage? Was it the increased competition from Tesla and the other top luxury automakers that is impacting sales of these automakers? It’s impossible to know for sure. What seems clear, however, is these brands are in danger of becoming irrelevant in the U.S. market without significant changes to their product portfolio or their business model.

Toyota sold 5X more vehicles than Tesla in 2021 (even excluding pickup truck sales)

Alternatively, some believe Tesla competes with the volume U.S. automotive companies. If true, how did Tesla fare relative to the traditional volume car brands? First, one must acknowledge that Tesla is not in the same league as the volume U.S. automakers. For example, Toyota sold over 5X more vehicles than Tesla in 2021 even excluding their pickup truck sales. Let’s not forget, however, that Tesla sales grew 40.4% between 2019 and 2021. This growth occurred during a period when the total U.S. automotive market (even excluding pickup trucks) actually declined 12.5%. This type of growth for Tesla suggests Tesla is rapidly transitioning to a volume automaker that might one day challenge the traditional volume players in the U.S.

• Tesla: 40.4% growth; 313,400 total vehicles sold
• Toyota sales, minus pickups, were flat at 1.7 million vehicles in 2021
• Nissan sales less pickups declined 18% to 919,086 vehicles
• Honda sales, without pickups, dropped 10.6% to 1.3 million vehicles
• Chevrolet sales of non-pickup truck models declined 34.2%
• Ford sales, excluding its pickups, dropped 24.8%

Of this group of volume automakers, only Toyota was able to maintain sales volume during the period where Tesla’s sales grew over 40%. The other volume brands (Nissan, Honda, Chevy and Ford) experienced dramatic reductions in vehicle sales from 10.6% for Honda to 34.2% for Chevy.

A more useful analysis might be to compare Tesla’s most popular vehicle (Model Y) to similar models from the other volume brands. As a compact SUV, Model Y is competing in one of the most popular and competitive vehicle segments in the U.S. market. If Tesla can scale in this market, it suggests the company can grow sales in other segments as well. Scaling in multiple vehicle segments is the very definition of being a volume automaker. So how does Model Y sales and sales growth compare to competitive volume vehicles?

Tesla sells more Model Y vehicles in less than 2 years of existence than GM and Ford sell of their Chevy and Ford brand compact SUV models.

• Tesla Model Y 2021 sales: 172,700 (zero sales in 2019)
• Toyota RAV4: 407,739 (-9.0%)
• Honda CR-V: 361,271 (-6.0%)
• Nissan Rogue: 285,602 (-18.5%)
• Chevy Equinox: 165,323 (-52.2%)
• Ford Escape: 145,415 (-39.8%)

The above compact SUV vehicle-specific sales data, shows an impressively aggressive growth trajectory for Model Y. Remember, Model Y is the only purely electric vehicle in this competitive set. In less than two years, Tesla sells more Model Y vehicles than GM and Ford sell of their volume Equinox and Escape models respectively. Will Nissan Rogue be the next competitor to fall to Model Y? Will Tesla some day challenge Toyota and Honda with its Model Y vehicle? Might there be more vehicle introductions by Tesla in other segments that help drive sales growth even higher, while conquesting buyers from other automakers?

Tesla already has Apple-like profit margins.

Tesla has caught and will surpass all of the premium automakers this year. That can no longer be denied. Now the company’s volume vehicle, Model Y, is challenging the leaders of a very popular and important vehicle segment. This suggests, Tesla is rapidly becoming a volume automaker as well. Thus, any debate about whether Tesla is a luxury automaker or volume competitor is irrelevant. The company is increasing its ability to sell premium priced automobiles at the scale of volume automakers. This is very similar to Apple’s ability to sell premium priced mobile devices at scale as well.

As described in my last newsletter update, Tesla already has “Apple-like” profit margins with a 2021 gross margin of 29.3%, almost 3X higher than General Motors. Rapid scaling combined with its industry leading profit margins means Tesla seems destined to beat all of the major legacy automakers (luxury and volume car companies). Obviously, this is not a foregone conclusion. But without rapid and sustained changes in the business models of these legacy automakers (or unforeseen headwinds for Tesla), legacy automotive future prospects remain cloudy.

Disclaimer

TaaSMaster, LLC is not a registered investment advisor or broker/dealer. All investment opinions expressed by TaaSMaster, LLC are from personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors may occur.

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