Tesla’s Model 3 is only the 10th best-selling EV in Norway this year.
69 days into Q1 of 2020, just 388 Model 3s have been registered in Norway. That’s just 16% of the 2374 Audi E-Trons that have been registered since 2020 began.
For additional reference, Tesla had already sold 1814 Model 3 vehicles in Norway in the first 69 days of Q1 of 2019, and 687 in the most recent quarter.
In isolation, these numbers aren’t overly concerning. For years, Tesla has been prone to violent ebbs and flows of sales in smaller markets such as Norway. The release schedule of new vehicles and the batching of shipments makes a steady flow of vehicle shipments to Norway almost impossible. But this sales dip isn’t just affecting Norway.
Tesla will report quarterly delivery data in a few weeks, and lower-than-expected Q1 deliveries looks increasingly likely.
Also, the lingering concern of the Coronavirus certainly isn’t helping Tesla’s Q1 delivery push. China already saw significant drops in car sales (upwards of 92%) during February, and it’s likely the rest of the world will also see similar, temporary drops in car purchases.
But the Coronavirus and EV incentives aren’t Tesla-specific challenges. They both affect all EV automakers to some degree. So then why are Tesla Model 3 sales now being crushed by all sorts of second-tier EVs in Norway (and Europe at large)?
And when I say second-tier I mean it. The 9th best-selling EV in Norway (with 38 more registrations than the Model 3) is this electric delivery van with just a 40 kWh battery.
There are a handful of reasons that Norway’s EV leaderboard looks different from America’s. After all, Tesla’s Model 3 is absolutely crushing all other EVs in America. So why aren’t European sales showing the same level of domination?
Let’s explore the shifting competitive landscape to figure out how European buyers are toppling Tesla’s domination, and whether the increased competition will be temporary or permanent.
Tesla’s Model 3 is a car designed for North American life. While it’s considered a compact sedan in North America, it’s actually among the larger sedans in Europe where streets are narrower, and cars are generally smaller.
The 9 EVs that are out-selling the Model 3 in Norway aren’t all small (Audi E-Tron and Nissan E NV200 are larger), but 4 of the top 6 are tiny hatchbacks.
The small footprint of a hatchback is useful for two reasons.
These advantages make it easier for other automakers to compete with Tesla in Europe by building small hatchbacks. Maybe one day Tesla will make one of their own, but until then they’ll likely face a small headwind.
Again, I’m not suggesting the Model 3 is too large to sell in Europe, but I think there will be a persistent, subtle advantage that European automakers will continue to exploit by producing small EVs. They’re more appealing for city driving, and less battery capacity is required to achieve an adequate maximum range, so automakers can get away with having slightly worse battery technology than Tesla has.
Another reason for Tesla’s lower sales ranking in the European EV market is that some European EVs aren’t even for sale in America. Both the Renault Zoe and the Nissan E-NV200 are ahead of the Model 3 in 2020 Norwegian sales, and neither car is sold in America. The three closest cars behind the Model 3 are also not sold in America - the Skoda Citigo, the Opel Ampera-E, and the Seat Mii.
Europe seems to be a step ahead of America in EV adoption, so Tesla’s domination of America’s EV market is artificially high and is likely to come down over time as Ford and GM roll out their first serious electric vehicle competitors.
Autopilot has become one of the most important features of Tesla vehicles, and one that I personally can’t imagine driving without. In America, Autopilot trounces the navigation systems offered by other automakers, and it’s a massive selling point that sets Tesla apart.
In Europe, however, regulations have forced Tesla to restrict certain Autopilot features. The intended effect was to improve safety, but the result is going to be a more level playing field for automakers with poor navigation systems (and less safety).
It’s clear that Tesla is in a league of its own when it comes to software capabilities, but if Tesla customers can’t use the features Tesla creates, Autopilot loses its potency.
Instead of spending an extra couple thousand dollars on a Tesla for all the cool Autopilot features, Europeans now have to weigh their options. Buying a Tesla is still more expensive, but the feature disparity between Tesla and other automakers has shrunk.
Not because other automakers are necessarily catching up to Tesla, but because of regulations. While I don’t think Europe’s regulations will be a long-term challenge for Tesla, they definitely detract from the experience of owning a Tesla today.
Tesla’s vehicle seasonality is especially pronounced in smaller markets like Norway. A three month window is probably too small of a window to really see how Norwegians are buying Tesla’s Model 3 this year, but that’s all the 2020 data that exists right now.
However, if we look back to 2019, an interesting trend emerges.
The Tesla Model 3 is experiencing its lowest quarter of EV sales since it was released in Norway. This much is to be expected since Norway phased out key EV incentives at the end of 2019.
But what doesn’t make much sense is that almost every quarter since launch has seen lower sales. On the other hand, the Audi E-Tron, which began selling in Q1 of 2019 just like the Model 3, is experiencing it’s best ever quarter of sales in Norway - and each quarter is an increase over the last.
Since we're 69 days into Q1 of 2020, the chart below shows the number of sales in the first 69 days of each the last 5 quarters for comparison.
Why? I’m not entirely sure. Audi did have some early production issues with the E-Tron that may have forced some 2019 production into 2020, but we will need more data to know for sure.
I don’t see why the Audi E-Tron should be out-selling the Model 3, given the higher price and lower range, but maybe they’re filling a void in the SUV market beneath the price point of the Model X right now. Once the Model Y is released, we’ll really know how much of a competitor the E-Tron is to Tesla.
The data coming out of Norway, the Netherlands, and Spain isn’t enough of a reason for Tesla investors to worry. These are small markets, and the data shifts significantly each quarter. But they’re also markets that are quickly adopting electric vehicles, so it would be unwise to completely discard the shifting EV landscape there.
The EV competition Tesla is facing in Norway right now is a promising sign that automakers are seriously considering electrifying their fleets, and will likely increase from here. For Tesla, this means market share will probably decrease slightly, although the overall market size will increase far more to compensate.