Tesla’s Model S Is the Best-Selling Luxury Sedan in America
In a letter to investors yesterday, Tesla Motors said deliveries of its Model S electric sedan grew 76% in the fourth quarter. It also published a table (see below) that compared its flagship model’s annual sales to similar cars by other manufacturers. The surprising takeaway reflects a huge shift in the auto industry: The Model S is now the top-selling luxury sedan in the U.S, beating out cars from established rivals like Audi, Mercedes, and Lexus. Moreover, the car, according to Tesla, is still gaining market share.
Of course, luxury sedans are just one small portion of the luxury car market (and a portion that’s shrinking). And Tesla still has a miniscule share of the 17.5 million cars sold in the U.S. last year.
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But yesterday’s announcement about brisk Model S sales has at least temporarily revived optimism about the carmaker’s long-term prospects. Tesla (TSLA) shares were up nearly 5% today after dropping close to 40% so far in 2016 .
Tesla also said on Wednesday that it expected to increase production of the Model X SUV to 1,000 cars a week by spring, and to nearly double its overall vehicle deliveries this year. The new Model 3 mid-budget sedan will be unveiled on March 31, with production beginning in late 2017. The company will also invest about $1.5 billion in infrastructure, including work on its Gigafactory battery production facility, and said it should be profitable for 2016 on adjusted earnings.
Tesla’s ability to so decisively trounce established players–and do it without a traditional network of dealerships, in just the Model S’s third full year on the market–is a major accomplishment. It also shows two things:
First, the Tesla brand is maintaining a solid reputation against some headwinds. Fourth quarter sales were strong despite a warning by Consumer Reports in October about the Model S’s reliability. Stock downgrades and analyst’s worries about excessive spending and looming competition from big-name automakers also failed to put off consumers.
Second, and much more importantly, the numbers suggest that anxiety about electric cars as a whole is fading among higher end car buyers. The big worry about electrics has always been about their limited range compared with gasoline powered cars. But the Model S’s ability to go more than 200 miles on a charge has put that to rest.
Yesterday’s report also said the company will open up 300 more of its Supercharger charging locations, a more than 50% increase that would bring the North American total to just under 900. That would make it not just possible, but effortless, to take an all-electric version of the Great American Road Trip.
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Moreover, buyers are catching on to the advantages of electrics over gas cars, especially advantages that have nothing to do with the environment. The introduction of a new Ludicrous Speed for some models of the S, which gave the vehicle acceleration on par with boutique sports cars, got a lot of attention over the summer.
All of that bodes extremely well for the Model X, Tesla’s luxury SUV, which has a long waiting list of eager buyers. Luxury SUV sales spiked last year, so if Model X production can increase as planned, 2016 could be a truly electric year for Tesla CEO Elon Musk.