$35,000 Tesla Model 3 Grows Market Potential From 1.5 To 7.6 Million


J.D. Power sees the $35,000 Model 3 as a massive asset for Tesla.

It comes as no surprise that by offering a cheaper car, Tesla will benefit. However, J.D. Power and Associates has taken a more extensive dive into the data. Needless to say, it’s hugely positive for the Silicon Valley automaker. Essentially, the Tesla Model 3 could easily dial up Tesla’s future addressable market potential by a five-fold figure.

According to J.D. Power, 2018 results show that vehicles over $50,000 only made up about 1.5 million total sales in the U.S., which is some 8.8 percent. So, in looking at Tesla sales for Q4 2018, the automaker hit about the 2 percent mark. However, if you just look at cars over $50,000, the all-electric automaker successfully grabbed about 14 percent of that market. Clearly, this shows that Tesla is well ahead of the rest when considering its price point. J.D. Power admits that this is a “remarkable” achievement by the brand.

What is the market potential for the cheapest Tesla Model 3?

Now, Tesla has finally launched its Standard $35,000 Model 3, along with some other, “inexpensive” variants. Many people who were excited about the Model 3 at its initial unveiling and/or hoped they’d be in the market for a Tesla can now jump on the bandwagon. J.D. Power notes that if Tesla can replicate its incredible sales performance with sales of these cheaper variants, the results will be astonishing.

The market research company reveals that vehicles with a $30,000 or higher purchase price made up a healthy 46 percent of the U.S. market (7.6 million units). This is about five times higher than the market for vehicles costing over $50,000. It means that Tesla’s market potential grows by five times, from 1.5 million to 7.6 million. Keep in mind that this is before any federal EV tax credits, as well as state and other related credits for EV purchases. Hypothetically, the market potential for the least expensive Model 3 vehicles could fall into the even more popular (sub-$30,000) bracket when accounting for the potential credits.

J.D. Power points out, however, that there is a caveat. The Model 3 is a sedan, which is not a popular body style on our shores. Still, looking at vehicles in the $30,000 to $50,000 price category, some 700,000 units were sold in the U.S. last year. With that being said, Tesla has a massive market potential with its less expensive Model 3. Once the Model Y is available, especially once Tesla offers its least expensive variants, the results could be otherworldly.

Categories: Tesla

Tags: , ,

Leave a Reply

22 Comments on "$35,000 Tesla Model 3 Grows Market Potential From 1.5 To 7.6 Million"

newest oldest most voted

If Tesla got 14% of car sales over 50k, and there are 700,000 sedans sold between 30k-50k, then 14% of that would be 98,000. Considering last year’s sales, it seems like Tesla already has more than 14% of that market.

Yeah, something’s wrong with the math. The post says there were 7.6 million vehicles sold at $30k and up, and 1.5 million vehicles at $50k and up. That would leave 6.1 million in the 30k-50k range, not 700,000.

There were about 700k sedans sold in total for 2018. More than SUVs and crossovers. Sedans are still huge in the US and only being adjusted by some ‘sharing’ the segment with SUVs and crossovers. While at the same time consumers are moving between sedans and crossovers/SUVs as preferences and needs change. For example, once the kids are out of the house, they sell the big SUV and buy a car, especially when climbing in and out of a suv is difficult or don’t want or need a big suv/crossover/wagon. Just look at how many suvs/crossovers are traded in for the Model 3. The superior driving dynamics, aerodynamics, electric range and sleek design of the electric sedan is the rebirth of the sedan. ICE automakers don’t want this because they gain huge margins for overpricing($6k to $8k more) the crossovers/SUV which shares75% or more with the sedan of the same segment. Then again many consumers just buy what their neighbors buy to fit in, but much more cumbersome to drive with much poorer visibility from the sides and rear. Moving from a big suv/crossover to a Model 3 should feel like magic. Effortless power and amazing driving dynamics…able to drive… Read more »

No, the sedan share is falling, but it is a lot more than 700,000 per year. Just the top two models, Camry and Civic, accounted for more than 750,000.

Most of those are under $30k. 700k between $30 and $50k. I wouldn’t be surprised if the $30-$50k sedan segment grew last year because of the Model 3.

Thanks, I think you’re right — that’s what the post was saying. Not super clearly worded.

Kenneth Bokor (EV Revolution Show - YouTube)
I would disagree with this Bloggin. Sedans are not the largest segment in USA, SUVs/CUVs are. If you look at these numbers in this article: https://www.caranddriver.com/news/g25558401/best-selling-cars-suv-trucks-2018/, do the math. Estimated 17 Million autos sold in USA in 2018, more of them were SUVs/CUVs or Pickup Trucks than Sedans. The logic for some moving from a SUV to a sedan (kids grown up, etc.) makes sense, however I still see a lot of people keep a SUV/CUV and add a Sedan or more likely a compact hatchback to the mix. Have the bigger mover for trips, outings, etc. and a commuter car for at least 1 to drive for work, around home stuff. Ford has not cancelled their Sedan program just because. They know where the market is (with higher Margins) as an example. So yes the Model 3 is a great BEV, however it still may not appeal to as many as JDP thinks. I’d be just as happy if these current ICEV SUV/CUV and PickUp Truck drivers went to a BEV equivalent. And more choice is coming for this segment (Audi, Mercedes-Benz, Kia, Hyundai, Rivian, etc.) beyond just Tesla with the X and upcoming Y models to help with… Read more »

But who is counting cars as “SUVs” or hatchbacks or liftback sedans? If it’s the car marketing departments, then that’s pretty meaningless. These days, they call anything an “SUV” or a “CUV” if it’s got a rear hatch, even compact hatchbacks.

The EPA has categories for “cars” versus “light trucks”, and some of the models that American auto makers call “SUVs” don’t qualify by the EPA standards.

There’s rather a lot of bias here. As already pointed out, sedan sales in the US have been in precipitous decline since 2012/13 (earlier in europe). There isn’t an uptick from people swapping between the two, at least in national data. A lot of older people actually prefer CUV’s because the lifted nature of them means they’re actually easier to get in and out of than a lower sedan, and those swapping their CUV/SUV for a sedan are doing it for a false economy if they’re doing it for size reasons. Counter to your opinion CUV’s and SUV’s are usually physically smaller than their sedan equivalents. Take the CRV for example. It was based on the Civic platform*, but replaced a lot Accord sales for Honda. The Accord is a significantly longer car than the CRV, yet they’re both the same width and the CRV has more head, leg and boot room than the Accord (due to the additional height). Sure, swapping a CRV for a Civic Hatch when they don’t need the space could make sense (although there’s not as much difference in length/width as you may think), but swapping it for an Accord makes no sense at all.… Read more »

“The future’s so bright I gotta wear shades.”

Are there superchargers on the road to Timbuk 3?

The market is about to flip. Within five years, there will be a 20-25k compact EV, and a pick up.

Who or what is JD Power? Is it like Warren Buffett?

I thought it was an advertising campaign by GM. 😛

J D Power is a company that if you pay them enough, they will create a category for your product that includes only your product. Therefore, you will win an award for best in the newly created category.

Can we have a link to the actual article?

(Original James) While the folks at J.D. Power appear to be a tad over optimistic, there is the introduction of Model 3 into the mix. I cannot see many twists that would provide a sub $30,000 Model 3. Sure, a black base model with full pop California credit and current ZEV refund could possibly squeak in there before taxes… What’s needed is the Civic/Corolla sized sedan and CR-V sized crossover SUV. Will profits from Model Y allow for enough economy through scale to make that sub $30,000 Tesla happen? I don’t see it happening. The wild card in the bunch is the pickup truck. Get that right and Tesla could tip the scales. Otherwise, I look to Volkswagen to push us over the EV tipping point. They have the resources to make it happen. VW can ramp up EV production on it’s MEB platform faster than Tesla can respond. To date, Tesla has established it’s reputation as a premium brand competitor. The likes of Toyota, Hyundai Group, Honda and Ford could rest easy that their customer base for sub – $30,000 cars was safe. A lot has to happen without hiccups for Tesla to leave the Lexus, Mercedes, BMW crowd… Read more »
Kenneth Bokor (EV Revolution Show - YouTube)

Yup agreed. The bigger segment is the <$30K offerings and VW has a good chance to take a good lead in this market, and we need more people into BEVs so this is all good.

Tesla is and will certainly benefit from the Base Model 3 offering as well as the Model Y (if it's costs competitive). However, I see JD Power's numbers for them very very optimistic. And when is Tesla supposed to be able to produce these 7.6 Million vehicles per year? I don't know the answer to that but it's not anytime soon.

Again, as Original James states, Tesla is a Premium Brand and they want to keep it that way so this will "limit" their market space and selling prices.

The bigger piece of the pie Globally (not just look at USA only) is this sub-$30K USD space which others are going after.

I wouldn’t consider Tesla’s mission to be complete until they make that transition. I still don’t trust any of the legacy manufactures to miss an opportunity to go back to their old ways. Tesla has to keep pushing until someone like VW has already completed the transition. A recession could see the legacies perform a full pullback on EVs and leave Tesla financially vulnerable. Tesla needs the flexibility to keep all of their factories operating at full capacity in the event of a downturn, otherwise I don’t think they could financially remain afloat when all of their resources have been directed to growth.

Having true mainstream vehicles would go a long way in keeping utilization rates high in the event of a downturn, it may be the only way they could stay profitable in such a scenario.

And I believe Tesla could do this, they have killed all of the legacy automakers on costs thus far, I see no reason they couldn’t do it if VW can.

(Original James) Markets are SATURATED. As a typical new auto consumer, your choices are staggering. Pick any category and you can wheel and deal as long as you have no huge brand bias.

Say you just want a car to get to work. My sister is in this group. She buys cars like some of us buy socks! She will buy a KIA, Volkswagen, Chevrolet… She focuses on price as do at least 1/2 of the market. She’ll be more impressed with color and perhaps the Consumer Reports scores than whether its electric or of a reputable brand or made in USA (or Canada). I often say of her that she’ll be first in line to scoop up a Chinese import once they hit our shores.

We EV fans share that the environment, maintenance costs and cheaper electricity are reasons to buy electric. The Wal Mart mentality makes up the majority of the mass market. Sure, you take folks on test drives all day and they seem to enjoy the experience. In the end, the price of electric cars needs to come down towards the gas burners even though fueling them costs less.

Kenneth Bokor (EV Revolution Show)

Your on a roll today (Original James)! Absolutely correct. Costs are still a big factor for the vast majority, mass markets and Tesla simply is a Premium Brand, $35K Model 3 or not.

The sub $30K, hey I would even go lower sub $25K for new cars is a prime market. It will still take some time for costs to come down to those points or at least achieve cost parity for EVs. I’ve provided multiple examples of this financial aspect in many posts on this website so won’t repeat again.

Education is also a key component to getting people into EVs and that has a long way to go. You look at the posts on this site or other EV-related websites and forums and you see the same few dozen people posting with a very few new exceptions. This info needs to go out to more mainstream audiences, not just us who are passionate about EVs, and the main way to do that is through more mainstream outlets and public outreach, in many forms.

Slowly but surely we are getting there.

After a lot of deliberation and doubting, I have at last surprised myself by actually taking the plunge and ordering the Model 3 (LR AWD). I’ve already signed a document entitled “purchase contract” for a Hyundai Kona, with estimated delivery in Q2, 2019, back in July of last year, but with a two year waiting list for new orders and “used” ones still getting listed every day at higher-than-new prices I think that’s solvable. I’m pretty excited, but not 100% sure I’ve made the right choice. Kona offers incredible value, with nearly as much range and a lot more equipment for much less money. It has a better warranty and is likely better quality. And I’m still convinced more hardware buttons would have been better (though a tiny OLED on each so they’d be as reprogrammable as a screen would be wonderful). The configurator said estimated delivery this month (!) but I’m assuming it’ll be the first half of April. After four years with a first-edition LEAF as my only car I expect to feel free almost like I did at sixteen when I got my first road-licensed motor vehicle (I bought my first motorbike at twelve or thirteen, I… Read more »