Volvo’s Polestar 2 Outsold Tesla’s Model 3 In Sweden And Norway In August
A look at a stock chart might tell an investor that Tesla TSLA was dominating the global auto market, or even the global market for electric vehicles. Nothing could be further from the truth. Tesla’s flagship Model 3 was outsold by Volvo-owned Polestar’s Polestar 2 battery-electric model in several key markets in August. The numbers I have—from Norway’s OFV and Sweden’s BIL—show the Polestar 2 with 504 units sold in Norway in August versus the 264 Model 3s Tesla delivered there. The Polestar 2 also outsold the Model 3 in Norway’s neighbor Sweden in August, with 284 deliveries versus the Model 3’s 235.
Battery-electric vehicles still represent a small part of the world’s auto output—1-2%—and represent a similar portion here in the U.S. So, some observers are guilty of overanalyzing the sparse data that Tesla reports, or, even worse, merely reporting it and not analyzing it at all. Tesla’s strong sales performance in the European market (111,119 units delivered in 2019; about 30% of Tesla’s global total) drove the company’s 367,200 global delivery tally last year. That will not recur.
For reasons that have everything to do with stock market-pleasing hype—as seen in the company’s filing for a $5 billion at-the-market offering Tuesday morning—and nothing to do with fundamentals, Tesla’s 2Q earnings press release noted the company’s “target is to sell 500,000 units this year.” Despite early success from the company’s plant in Lingang, China, Tesla won’t even come close to moving half a million units this year.
Even with strong take-up of the locally-made Model 3 in China, Tesla sold only 179,000 units in the first half of 2020. So, the company was not even halfway to 2019’s figure of 367,200 units sold at the year’s halfway mark. Brutal results from Europe in July (Tesla registrations fell a combined 76% across the 15 major markets) and early results from August confirm this. Tesla deliveries tend to form a pattern of soft-soft-loud in any given quarter, so September will be the key.
I see no indication in my analysis of the registration figures—which are reported daily in some European countries—that availability has been an issue with Tesla’s European sales as the Summer has progressed. Teslas sold in Europe are currently made at its Fremont, CA factory. I think buyers looking for CO2-emissions-free vehicles just have other options. That makes Tesla’s decision to build a new plant in Brandenburg, Germany a very questionable one. That facility, currently under construction, is being built to serve a market in which Tesla is losing to its competition. In my opinion it is an unwise use of capital.
The combination of COVID-19 and the pincer effect from Volvo’s Polestar and VW’s ID.3 model (which was first delivered to European customers last week) has put Tesla under serious pressure in the European market.
August numbers have just begun to trickle in, but, through July, Tesla sold (car sales are typically measured by government registrations in Europe; I learned this the hard way when I lived there and analyzed the auto industry for half a decade) 38,814 units in Europe, a 22% year-on year decline from the 49,930 units Tesla delivered in Europe in the first seven months of 2019. So, that explains how Tesla could report fewer units sold in 2Q2020 than in 2Q2019 (90,891 versus 95,356) despite having two manufacturing plants (Lingang, China as well as the factory in Fremont, CA) instead of one. Participants in the auto industry have been facing the pandemic of intense competition for many decades.
The numbers-blind quasi-futurists who constantly pump Musk’s stock on behalf of second- and third-tier Wall Street firms tend to focus on the one market on Earth in which BEVs outsell cars with internal combustion engines (ICE.) That is Norway. BEVs represented 52.8% of Norway’s total vehicle sales in August 2020, but the country’s total car sales only reached 10,802 units. The Scandinavian country is often presented by Tesla bulls as some kind of beacon in an all-electric future, despite Norway’s global rank of 119th in population. We will all be Norway soon!
That is unlikely, but Norway’s electrification movement is useful, not as a portrait of the pace of the world’s move from ICEs to BEVs, but in how the global automakers will capture share in that market. So, the fact that Polestar has been able to surpass Tesla in monthly sales so quickly there should be a reminder to constantly-optimistic Tesla analysts.
The auto industry is brutally competitive. I first started following the industry 30 years ago, and learned that that fact is just as true on either side of the Atlantic. Or the Pacific, actually.
But, again, that is why Tesla’s share price movement has been so baffling to me. Replacing an internal combustion engine with batteries and an electric propulsion system is not in any way disruptive. It’s still a car. I enjoy driving BEVs, including the Model 3, and I look forward to driving several new BEV models when I visit Europe next week. That said I do not own a BEV because I hate having to wait to charge them, especially when a similarly carbon-free technology (hydrogen fuel cells) would allow for much faster charging.
BEVs will always have an advantage over ICE cars in straight-line, 0-60 acceleration because of their non-reliance on the mechanics of internal combustion. But they are still cars. They are still sold in a global marketplace that is both brutally competitive and growing at a very, very slow rate.
The real disruption is not happening in powertrains, but in ridesharing. Companies like Uber UBER and Lyft LYFT may have given consumers an alternative to car ownership, and that is what the industry should be focused on. So, that is the real challenge to automakers, not moving rapidly to electrification, when only Norway seems to be doing so.
Polestar won a round over Tesla in the BEV wars in Norway and Sweden in August. Also, the always nerdy—but often useful—BEV-focused blogs have reported that the first shipment of VW ID.3s arrived in Norway last weekend. The wheel continues to spin. Elon Musk has not changed anything. The auto industry is, was and always will be brutally competitive. Wall Street will realize that once again soon, belatedly, as it always does.