March 9th, 2019 by Alex Voigt
Many have predicted that the growth of Tesla in Germany will be limited by different factors that are unique to the market and differentiate it from markets like the US, Norway, and the Netherlands. The first of those factors is the German auto industry, which is without any doubt the dominant industry (including suppliers and suppliers of suppliers and suppliers of suppliers of suppliers) in the largest economy in Europe. As such an influential industry, it has a large influence on politics, laws, and regulations.
Secondly, Germans have grown up with strong loyalty to their own brands — VW, Audi, BMW, Mercedes, Opel, and Porsche are each famous for different vehicle aspects and styles. Together, they span the entire field of segments a car buyer can wish for. The average German is pretty nitpicky and expects a superior quality of car, a test that most companies from abroad fail to deliver one way or the other.
Be it panel gaps, the sound of the door closing, the interior materials, the cockpit leather seam, or an outstanding drivetrain experience (feel and sound), there’s an expectation for a flawless car together with an awesome delivery process that beats your best ever Christmas moments as a kid. This is the norm for buyers, and any deviation from it results in immediate complaints and bad press.
Lastly, a large portion of Germany’s GDP, as well as jobs and livelihood, depends on those companies. People working there or their family or friends live and breathe in an echo chamber of positive news about the company they work for every day. It paid for their house, provided loans with low-interest rates like banks do, and provided free doctor services onsite. Soon, all friends you have are somehow also connected to your car company and talk the same talk. You live a good life and you never bite the hand that feeds you.
Living in Germany and working for the auto industry has been good so far. But for a few years, there’s been something happening that is disturbing the peace. A new technology — electric vehicle technology — appeared and is changing most aspects of the traditional gas car. Electric vehicles (EVs), like Apple and Amazon, are promising a new world. People smiled and joked about them at first, but the joy the managers of the German auto industry had has disappeared.
More of those EVs have come to market year after year, but they’ve been nicely staying below 1% of market share, with modest gains in terms of volume. The general assumption had been — nothing to worry about. These incumbents decided to build some too, be it because of public or political pressure, to prove that they can do so as well.
When Tesla appeared on the market, the German auto industry did put an eye on the young company (and one of them even helped to fund it for a bit). As the company grew, they announced that more electric vehicles would be released soon. However, more and more delays of those releases have been announced lately, and consumers are still waiting for a long-range yet affordable electric vehicle from Germany.
There’s a lot of talk and a constant notion of competitive fully electric cars (BEVs). The German auto industry has promised these for years, but for different reasons, they’ve yet to arrive, with the exception of Audi’s young e-tron, a car that reportedly has a loss of €3,000 per vehicle sold*. [Editor’s note: These kinds of criticisms are common in the industry and often come down to scale. With higher production volumes, per vehicle “losses” come down until a crossover point where the model becomes profitable — starts making money in net. Of course, there are also cases where the model is genuinely underpriced for the cost or where that crossover point is never reached.]
Back to the top, there are many reasons for Tesla to not do that well in Germany, in contrast to other markets in Europe where it has successfully seen growing sales over the years.
Tesla Model S and Model X sales in Germany, taking into account the country’s 82 million people and the buying power of those citizens, have been pretty modest. That is true even though German manufacturers as of today have no credible competitor to compare with Tesla’s models, and especially not with the now much more affordable Model 3.
Since German deliveries of the Model 3 started in Munich on February 13, 2019, people have been speculating whether the lower cost Tesla will make a difference and how it will be received in a country where auto industry managers say they have petrol instead of blood in their veins.
Now the time has come to look at data and facts, since the first official delivery numbers were released for February 2019.
In order to get any car delivered, an official registration at the KBA (Kraftfahrtbundesamt) has to happen. Then you get license plates and can drive your new car on German roads. Registration numbers are released once a month and give us solid information about how many cars have been registered and delivered.
Who’s Winning? Who’s Losing?
It’s fair to assume that some of the models that have lost market share since January — like the VW e-Golf, Nissan LEAF, and Kia Soul EV — have been affected by the appearance of the Tesla Model 3.
In just 16 days, about half the month of February, Model 3s were delivered in different centers in Hamburg, Neuss, Düsseldorf, Frankfurt, Berlin, Stuttgart, Nuremberg, and Munich. Those are the delivery centers I am aware of, but there may be more out there.
In those two weeks of February, the Model 3 Long Range AWD already became the best-selling electric vehicle in Germany — even looking at the entire month. Only the Long Range premium Model 3 has been delivered so far, with two variations and a price point between about €45,000 and €76,000. Since March 1st, prices have actually been reduced and it can be fairly assumed that demand will further increase.
Crunching some numbers, we could say that, from February 13th to February 28th, 32% of all electric cars sold in Germany were Model 3s. Every third buyer in that period decided with her or his hard-earned money to buy the Model 3 from US manufacturer Tesla. The next best selling model was the Zoe from Renault, which is about 50% lower in price, but the Model 3 still sold 115% more units.
As a reference, last month in January 2019, the best selling BEVs were:
- Renault Zoe: 17.7%
- VW e- Golf: 16.5%
- BMW i3: 14.3%
In just two weeks, the Model 3 went from 0% to market leader in battery electric vehicles in Germany, doubling the share of the next best BEV, and I do predict this is just the beginning.
The deliveries started slowly and increased over the course of the month, with much higher deliveries per day reported at the end of the month. That is understandable because the delivery centers themselves have been under construction and urgently needed more service personnel to deliver the vehicles.
Many people complained about a chaotic situation during the delivery process, but after they drove their own Model 3s home, they knew it was the right decision and have been in love ever since. In my previous article here on CleanTechnica, I reported quotations from Germans expressing their true love for the Model 3. In fact, out of all cars delivered, only one person reported that he returned the car due to quality issues and that owner wants to order a new one after receiving the refund. If we take that into account and look at the first reports in early March, we can predict that BEV market domination of the Model 3 in Germany will be even stronger in March and Q2 under the constraint that Tesla is able to supply enough vehicles.
Other countries in Europe have been much better places for Tesla sales, and early data from Norway show us 1,351 Model 3s have been registered from the middle of February to the end, with a rate of more than 100 per day. Right now, we don’t have any reason to believe that other places in Europe will be much different, and the 28 member states of the European Union have 512 million citizens who will happily buy a car that is faster, safer, more reliable, lower in maintenance costs, and in a few months (with the launch of the standard-range Model 3) will also be lower in purchasing price than the gas or diesel car they drive today.
Looking forward, the $35,000 Standard Range and $37,000 Standard Range Plus models that were announced last week will be available in Germany in ~6 months, the time of year where electric vehicles have more demand simply because it is summer (you have more range and it’s more fun to drive).
All information we have today points to the conclusion that the Model 3 will have similar success to what we have seen in the USA so far. The market is larger in Europe, sedans are much more popular, and the form factor is a perfect fit for our narrower roads and parking houses, places where owners of the Model S and Model X felt sometimes unease driving and parking.
Data does not lie but tells us a story. Some people reading this article may now claim that it’s just 2 weeks of data and not representative, likely just pent up demand. They may think complaints about build quality or service will take a toll.
Its is correct that we are analyzing early data in a short timeframe, but there is no reason to believe that, looking in the future, the trend will change. The satisfaction of people driving the Model 3 in Germany is exceptionally high and reports show that Tesla is working hard to solve service issues and address any quality flaws as quickly as possible. Not everything is yet on the level the average German automaker provides, but let us not forget that an average German automaker is not able to provide a Model 3 to you, nor a charging network that brings you easily to every corner of Europe.
Many people talk only about the cars when they talk about Tesla. If you try to find a solution for a complex challenge, you have to solve for all elements. Otherwise, your solution will be only as good as the weakest element. In this case, you need a fast charging network, and Tesla invest into that early on.
This week, with the release of the V3 Supercharger and an impressive announced charging rate of up to 75 miles (120 km) in just 5 minutes, Tesla again outpaced all other companies. Even if any other automaker secretly built a car with the same specs and price point and released it tomorrow, it would not compete as well, as you wouldn’t be able to use a superfast charging network like the Supercharger network to address your needs, not only to commute to work but also to travel to a business meeting in a town 500 km from your location or to your annual family holiday 1,500 km from here in Tuscany, Italy.
The fundamental difference Tesla has that makes it so hard for German automakers as well as all other to compete successfully can be summarized in three core elements. Each one of those is a challenge in itself, but the function of them together defines how good or bad you will do in the BEV industry — whether you will prosper, survive, merge, be bought, or go out of business.
You may be fast in each one of those elements, but the core question is if you are today faster than Tesla in the combined function of all three. If you are not, then you will inevitably fall further behind.
#1. The pace of innovation
#2. The pace of cost reduction
#3. The pace of growth
*all data from www.kba.de
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