Model 3 May Steal 50% Of US Segment Sales From German Automakers

Tesla Model 3

JUN 16 2018 BY EVANNEX 64


The rise of Tesla is bad news for a number of established businesses, but none are in more clear and present danger than the German automakers, whose vehicles face direct competition from the California disruptor. Model S has been stealing market share in the large luxury sedan segment for a couple of years now, and it’s surely only a matter of time before the Tesla Model 3 begins to encroach on the small sedan segment as well. This trend first began in California and Elon Musk announced Model 3 just became the leading sedan (US market share) in its segment.

*This article comes to us courtesy of EVANNEX (which also makes aftermarket Tesla accessories). Authored by Charles Morris. The opinions expressed in these articles are not necessarily our own at InsideEVs.

Above: Tesla’s Model 3 (Image: InsideEVs)

How bad will the carnage be, and why aren’t the Germans doing more to defend their markets? Dr. Maximilian Holland, writing in EV Obsession, predicts that the legacy automakers in the US small luxury car segment could lose 50% of their sales in the second half of this year.

Tesla foreshadowed this emerging trend in its First Quarter 2018 Update letter, with a graph that compares projected Model 3 sales to incumbent models such as the BMW 3 and 4 series, the Mercedes C-Class and CLS, and Audi’s A4 and A5. Tesla has indicated that most Model 3 production will continue to go to the US market through the rest of the year, and that volume should reach 5,000 units per week starting in late July or August. Dr. Holland does the math, and the results are likely to induce angst and schadenfreude.

It’s worth keeping in mind that assigning vehicles to “segments” is somewhat arbitrary – some industry analysts group models by size, others by level of “luxury” – however, most observers seem to agree about which vehicles they see as direct competitors for Model 3.

That said, the size of the “small luxury” segment was just under 450,000 units in 2017, or an average of around 37,000 units per month (according to Statista). The German luxury brands accounted for approximately 23,000 units per month, or 61% of the market. Assuming that it reaches its goal of 5,000/week, Tesla will soon be delivering some 21,600 units of Model 3 per month – comparable to the sales of BMW, Mercedes and Audi combined. “There can be no question that all the incumbents in this segment are going to be massively disrupted,” says Dr. Holland.

Above: Already, Tesla has pulled ahead of its German competition (Image: Tesla)

Why? Holland points out that the legacy automakers “have had years to plan for this moment, and yet have done little or nothing to counter it… despite the huge financial and engineering talent resources at their disposal.”

If the success of Model 3 came as a surprise, it certainly shouldn’t have – Elon Musk has been talking about producing a mass-market EV since Tesla’s founding in 2003, and when the company formally unveiled Model 3 in 2016, a quarter of a million orders poured in. The German brands could see how popular Tesla’s third-gen vehicle was, and they had to know that it would be aimed squarely at their markets – Model S has been pilfering from their plates since 2012.

Along with most of the world’s automakers, the Germans have been “sitting on their backsides fumbling around with press releases and half-promises of action on EVs while continuing to invest the vast majority of their time and resources into fossil fuel vehicles and trying to wring the maximum revenues out of this century-old technology,” as Holland eloquently puts it.

All of these companies have built quality EVs. BMW’s i3 was at the forefront of EV development when it hit the market in 2014, but senior management soon lost interest, and the Bavarians haven’t introduced a new EV since.

Above: Model 3 fleet en route for delivery (Image: MakerDad Dave)

How can such storied and powerful companies lose market position so quickly to a Silicon Valley upstart? EVs represent a far superior technology, as anyone who’s driven one will attest, and the high end of the market, where the high cost of batteries is less of a deal-killer, is the most logical place to introduce them. The German luxury brands “were ideally placed to explore the potential of EVs in the large premium segments,” writes Holland. “But they refused to do so, and instead they left that entirely to Tesla.”


Written by: Charles Morris; Source: EV Obsession

*Editor’s Note: EVANNEX, which also sells aftermarket gear for Teslas, has kindly allowed us to share some of its content with our readers, free of charge. Our thanks go out to EVANNEX. Check out the site here.

Categories: Tesla

Tags: ,

Leave a Reply

64 Comments on "Model 3 May Steal 50% Of US Segment Sales From German Automakers"

newest oldest most voted

Yes this must have been pretty obvious for the big three German auto manufacturers given the facts pouring in each month from TSLA. Jaguar has waken up as has Porsche… this automotive disruption is interesting indeed. I’m with a plug in hybrid at the moment… next car will be a BEV for sure in mid 2020 with a lot of selections to choose from I hope.

I think it only became obvious in mid 2016, when a huge flood of reservations came in. Reports were that even Tesla was only predicting about 100k reservations before the reveal. On top of that, Q1 2016 sales of S+X was only 15k, and all other EV sales made it look like consumers weren’t genuinely interested.

That’s the moment big auto started to realize the potential for EVs was real. Before that, I have to say the evidence really didn’t point to EVs reaching significant market share before 2025.

ONLY 100k reservations – just goes to show what Tesla has accomplished. 100k reservations would have been far and away the most ever seen for an automobile on introduction – like an order of magnitude, unless I’m mistaken.

For most cars in US, orders are placed by dealers, and most mainstream models are more than 400k. Tesla just has a different sale model.

I agree that this is when it became obvious, and when Merkel had her “what are you going to do about Tesla” meeting with German automakers. But for those of us paying attention, the writing has been on the wall for much longer. In my case since Tesla acquired Fremont for a song.

That was a sweet purchase, Fremont. Well played.

It became obvious after the Model S broke the scale on the Consumer Reports survey. Model S hugely encroached on German luxury sports sedan sales ever since, and they definitely felt the pain.

The Model 3 is taking it to another level, though. BMW 3-series killer, Audi A-4 killer, etc …

Jaguar due price and automobile class is a better Tesla competitor, I guess the Porsche will be way more expensive than Model S

“I guess the Porsche will be way more expensive than Model S”

Which Porsche model are you referring to — the Taycan (Mission E)?
The Taycan price in the USA will be in the same “ballpark” as the Model S, according to early comments from a Porsche executive.

Yeah, seems like a direct competitor of the Model S, IMO. Maybe shaded down a little toward the Model 3, but more S than 3.

“It’s worth keeping in mind that assigning vehicles to “segments” is somewhat arbitrary”
The correct segment for the Model 3 is overpriced non-luxury car sold with the help of the taxpayer

Sounds like you could be a bitter BMW execute in disguise….

Tesla is redefining what is luxury too. You can hardly call a BMW/Mercedes/Audi luxurious when looking at the drive-train. Also their interiors are dated, if you like retro then it might be something for you. The rest of the interior are they pretty good at, but that is about all….

There is one big difference. Profitability. The big automakers could make electric cars, they certainly have the technology, but not at a big profit like their ICE vehicles. Soon as people stop buying gas cars, then they too will start bringing out compelling offerings, as well. Hate to say it, but the little desired Honda Clarity FCV has just as much high tech in it as any Tesla. And as evidenced by the Jaguar, there are lot of great cars right around the corner, including the BEV BMW X3, i4, Audi eTron, etc. Just saw a picture of the new BMW 8 series coming out. So much nicer and more luxurious than any current Tesla Model. Seriously, just look at the interior craftsmanship. And for those of you that don’t understand, look at the pictures in the link and compare them to anything from Tesla. Think what you want, but the BMW 8 series is a work of art, and has way more curb appeal in the Valet Parking circle than any Tesla. And for many owners, that is what makes a difference. Oh, and the 3 series has a new replacement just around the corner along with the… Read more »

I’m not so sure they can… At least not with specs and volume to compete with Tesla anytime soon.

There has been a lot of talk about how they will bring the cars in the future, but Tesla has been eating their lunch for quite a while with little happening on their EV front.

Until the traditional luxury car manufacturers actually has anything that you can buy and get delivered Tesla is beating the crap out of them when it comes to luxury.

Your link is just confirming what I said, dated interior and only remotely luxurious as long as it is powered off and standing still. You seem to be living in the last century.

Someone is blind, and it’s not me. The BMW M5 is the first German seDan to hit 10s in the quarter and high 2’s 0-60mph. And it will absolutely school a Tesla sedan on the track or acceleration at higher speeds. Just wait and see what an M8 does.

The M8 is going to priced almost in Tesla Roadster territory, will be a 2+2, and be a low volume car. Not sure why you’re mentioning it in comments about the Model 3.

We’ll see soon enough what the Performance Model 3 does on the track with the first one rolling off the production line today. There’s a good chance it will beat an M3 on the track, so maybe an M5, too.

You are talking about a last century fossil. Nothing luxurious about it… retro though.

Today the gas engine came on in my Volt. Bummer. Totally kills the luxurious driving experience that I usually enjoy when going full electric.

Except those cars aren’t on the market yet, and Tesla is a moving target. Those interiors will improve, and BMW has no supercharger network.

All I could see in that link was an ICE. So you think we are comparing an ICE to an EV? Just so you know, if Tesla was selling an ICE we wouldn’t be having these discussions. It’s the EV that is changing the landscape. Once people drive an EV they just don’t want to go back. Maybe they do go back because the EV isn’t 100% ready for their needs, but they’ll covert getting their next EV.
As Tesla releases more of their profit back into product updates (and less into expansion) then I have no doubt they will improve on their luxury, fit and finish. Probably just in time for when the other luxury brands introduce their EV’s, if they are smart.

The article compares ICE to EV, in case you didn’t notice.

How about some crow to eat to go along with the sour grapes?

I think the writer is suffering from angst, and his comment is almost certain to provoke schadenfreude.

Sadly there is no such segment. Yes, classes for cars are becoming very blurred, but, in the end, it has to fit somewhere and it will compete better in some “segments” than others. That’s inevitable.

You have to include gas guzzlers and diesels they are government subsidized as well LOL CONNECT THE DOTS ON CLEAN AIR WAKE UP FOLKS thanks for caring

Last I checked billions of dollars are pumped to the oil industries as subsidies, also at the expense of the tax payers.

If government stop all subsidy, including fossil fuel. I bet more people will line up to get an EV

Exactly what taxpayer money are you referring to? Links and source citation please.

Something doesn’t add up. Tesla is shown with a 33% market share in May. But they sold 6,500 cars, which is a third of 19,500 – not the 37,000 you say is the segment size.

Probably has something to do with Elon using only four door models. The writer sends us to Statistica with no search parameters, as good as unsourced.

It’s Evannex there on Tesla junk

The graph doesn’t really show any decline in sales for Model 3 competitors yet. While Model 3 sales increase sales of its competitors remain pretty stable with the exception of 3 Series but that’s at the end of its model cycle. Of course at some point either the segment will have to keep increasing or Tesla’s rivals sales will have to decrease.

@Chris O says: “The graph doesn’t really show any decline in sales for Model 3 competitors yet.”

Keep in mind, this is market share being discussed and graphed. At each month the total should sum to 100%.
Tesla’s notably rising red curve here is balanced against (and is complementary to) the total of four slightly declining others.
Keep your eye on the red line. That’s all that counts! The rest will follow.

Good point. What we need is absolute numbers to see what’s what.

I agree the German automakers will lose a great share of the market to the Tesla Model 3.
I have a BMW I3 Rex. It’s an excellent car with pitiful all electric range. I do believe the Germans will understand in the next few years that what people are looking for is electric range and a robust infrastructure. I went into a Tesla showroom in Owings Mills Maryland and for the first time I saw the Tesla Model 3 in person. It’s a very impressive car and in my humble opinion it’s a better car than the Tesla Model S. This might seem odd, but in my opinion the model 3 seems to have more interior room than the model S. I think the model S is going to lose market share to the model 3. I spent a few minutes getting accustom to the door handles on the model 3. I finally figured it out. It worked best for me when I opened the door on the right side with my right hand and on the left side with my left hand.

From article: “How can such storied and powerful companies lose market position so quickly to a Silicon Valley upstart? “

They greatly underestimated Tesla’s/Musk’s ability to execute the Tesla Master Plan and greatly underestimated the willingness of their supposedly “brand loyal” customer base to rapidly migrate to a less established but more dynamic brand that offered a fresh and better alternative.

The Secret Tesla Motors Master Plan (just between you and me):

Master Plan, Part Deux:

Traditional car makers are still 2-5 years away from *maybe* being able to compete against Tesla’s today offering and Tesla is not sitting still… some will not survive the transition… the market share loss to Tesla between now and then will be massive and that massive market share loss has started taking place today… car sales are a zero-sum-game.

Ditto commercial semi trucking…

Nothing new here…

Blockbusters vs. Netflix

Walmart vs. Amazon


What will really be interesting is what happens after Model 3 advance reservations have been filled and it hits a baseline. Will sales decrease to the middle of the pack, or will it continue to dominate?

Counterpoint said: “Will sales decrease to the middle of the pack, or will it continue to dominate?”

Likely continue to dominate for North America & Western Europe… any fall-off of Model 3 demand will be more than picked up by upcoming Model Y.

Model 3 haven’t been shipped here yet, so “continue” to dominate is a bit of a stretch..

Magnus H said: “Model 3 haven’t been shipped here yet, so “continue” to dominate is a bit of a stretch..”

If “here” is Germany then your in for a big surprise…

Germany paid reservations for Model 3 is very high and volume Germany delivery starts early 2019.

Model 3 demand in Germany has dominated that automotive segment (BMW Series 3/5)… supply to soon follow.

Here is obviously Western Europe, that you said is dominated by Model 3 sales already even though it’s not shipped here (Western Europe) yet.

Zero Model 3 sales in Europe makes it impossible to dominate sales.

@Mikael said: “… Zero Model 3 sales in Europe makes it impossible to dominate sales.“

A Western Europe Model 3 paid reservation holder that currently owns a BMW Series 3/5 and that would have otherwise made his/her next car a BMW if not for the Model 3 offering choice… multipled 100Ks Model 3 reservations will greatly impacte Western Europe sales ahead of delivery.

So yes the paid Model 3 reservations themselves (if enoug critical mass is achieved) can dominate/disrupt the sales market ahead of delivery.

Failure for the traditional car makers to understand this dynamic is a huge mistake which they are coming to now realize in North America.

Walmart is still in business and is doing very well online shopping and pickup

There are thousands of startups that fail vs the incumbents. We do not know until it’s over, which side Tesla is on.

Do you not remember the dotcom era?

@Magnus H said: “There are thousands of startups that fail vs the incumbents. We do not know until it’s over, which side Tesla is on…”

No need to wait…

Tesla is no longer a “start up”…

Founded in 2003 and in 2006 published:

The Secret Tesla Motors Master Plan (just between you and me):

Tesla’s had Q1-2018 revenue of $3.4 billion with a market cap higher than Ford…

TSLA shares are mostly large institutional held… so idea that wild eyed Tesla cultist idealists prop up TSLA share value is a factual myth.

Likely with Model 3 entering high volume production Tesla will in 2018 cross into solid GAAP positive earnings.

Of the established North American car makers, only Tesla and Ford have never gone into bankruptcy.

It’s in the best interest of traditional car makers to view Tesla as a serious established competitor.

After having 2 EV’s an ICE vehicle is not exciting. I look at all the high end imports and am no longer impressed. I used to lust for a BMW but now they look very dated. Easier to have 2 electric motors putting out a lot of horsepower. A gas engine and transmission has to struggle to achieve that level of horsepower plus being very expensive. Like an earlier comment, the interiors are dated and have been. Teutonic interiors are not what the next generation buyers will want. Digital information(dash, gauges, etc.) is the future

This age of transition is like going from propeller airplanes to jets, steam engines to diesel locomotives, film cameras to digital, tube tv to LED flat panel tvs. The automakers that don’t change will go away, very quickly.

The Germans had better wake up. Time waits for no one.

I think the Jag I-Pace is what will be the style of semi-SUV that will sell.

A thing to keep in mind is that when a luxury brand like BMW or Mercedes looses a sale to Tesla they are often not just loosing that one unit car sale… the are potentially losing a customer for life so loosing out on that customer’s future EV purchases and related auto services…


Thanks Charles for sharing my analysis and adding a few gems of your own. We live in exciting times. BTW, I’m researching some future analysis on the 2018 Nissan Leaf. Any 2018 model owners with Leaf Spy .CSV log files could greatly assist me, especially with logs covering DC fast charging sessions and extreme speeds, temperatures. If willing, send to max dot holland at g mail dot com, and full sourcing credit will be given in the coming write up. Let’s accelerate the EV revolution! Keep up the great work Charles.

Tesla Mouthpiece again. How about the Leaf Evannex

I’m not sure Tesla is so much “stealing” from this class as “creating” a class. As an example, I get the feeling that a lot of Model 3 owners were not considering a BMW 3, Audi A4, MerC C, etc. if they hadn’t purchased a Model 3. Indeed, a lot seem to be buying their first “more expensive” car. I actually cringe a bit when I see folks referring to their “84 month” loans on TMC!

The sales may, in fact, be coming from across a wide spectrum of more average cars (Honda Accords, Small CUVs, etc.).

To the extend Model 3 expands the lower luxury class Tesla will be steeling market share but not necessarily sales from its rivals making the headline incorrect.

I read that the Prius had the most conquest buyers to Model S. Not sure if that’s still true, but I believe it was.

I’m not certain of why the other ICE makers haven’t responded, but perhaps the same thing that has made Tesla a risky also constrains their established potential EV competitors: the willingness to invest a huge amount of cash upfront. The ICE makers are profitable companies, but they do they generate enough profits to pay for quickly making mass market EVs in the Tesla quality range? Wouldn’t they have had to borrow and/or raise money by issuing a lot more stock too? Perhaps stockholders in Mercedes are not the kind investors to suddenly put their stakes at risk in a risky new business.

Stealing 50% of US Segment is not a existential threat to BMW and Mercedes. BMW and Mercedes sold about 2 million cars each worldwide and only small fraction of that in the US. Tesla sold about 100K worldwide same year, 50% in the US. Tesla needs to build 500K+ per year before BMW and Mercedes starts to panic and 1M+ for one of them to go out of business. Tesla can hit 500K next year with Model S, X, 3 but will need Model Y to hit 1M+… the key is Model Y which is probably at least 3 years away. If they build a Model 3 and Model Y plant in China and starts to sell them en mass, it’s game over for German luxury automakers.

I suspect the big boys were betting against Tesla with guidance from their bean counters as to immediately profitability vs long term vision.

Based on the chart BMW seems to be in the worst shape. Time will tell.

I think BMW has a small and closing window of time to beat the model Y to market with a competitive model. But, I don’t think the BMW suits are sufficiently motivated to capitalize on it. BMW seems to have lost its mojo and I don’t see signs of it coming back.

i4, iX3, and BEV for all thier series. I see some of the tech of i3 going into a new 3 series bev. Like carbon fiber doors and hoods

Nah, BMW is better off in this race than Mercedes-B. They’ve designed and mass produced some serious EVs, unlike MB. And they’re making good money. They will hit back, but Tesla has a nice jump on them.

BMW sold 2.4 million cars in 2017
I don’t think they are to worried at the moment.

I think one aspect, of Tesla vs the rest, is that Tesla has redesigned the packaging of the vehicle. Without exception, so far the ICE wanna be EV versions all copy the old ICE design of heaps is crap under the bonnet.
Contrast this to Tesla, where they have a very compact motor/inverter right on the axle, and all the other electronics tucked away neatly, and more of the vehicle space is made available to the user. All have a pretty decent front trunk, and all have very generous boot. About the only thing of complaint is the rear seating, and that seems more because the roof slopes for aerodynamics than anything else.
I love my Leaf, but I wish Nissan would take a “leaf” out of Tesla’s book and repackage all the junk under the bonnet and give it a front trunk.

The LEAF is FWD. But it does have decent rear cargo space.

“Tesla’s third-gen vehicle” the model 3 is not a third generation vehicle. Elon had already clarified this, if he had to give a generation number on vehicles he’d say they were all 4th generation. The only reason why it’s called model 3 is because it’s their third car in their line up (excluding original roadster). Also because the 3 looks like a backwards E as it was originally going to be called Model E. That was until Ford kicked up a fuss.