Tesla Model 3 has a lot of demand, but does it have a ton of demand?

July 24, 2019 by Zachary Shahan

This evening's Tesla teleconference could cover all kinds of topics, and CEO Elon Musk is known for occasionally pulling a rabbit out of his hat. But there is a fundamental question that will almost certainly be asked a few times, perhaps in a different way or perhaps exactly the same way on several occasions: what is the demand for Tesla vehicles? People will probably ask questions about each of the specific models – Model 3, Model S and Model X. They will probably also ask questions about overall sales and perhaps even Model Y preorders.

This is the fundamental question regarding Tesla (and TSLA) in recent quarters, and this will probably be the fundamental issue of the next few quarters, at the very least. I plan to write this article for weeks because it's such an interesting, important and difficult question.

In a very general way, the biggest difference between Tesla [TSLA] bulls and bears is a difference in how much consumer demand they expect. However, I think the discussions are often much more polarized than the actual badumptions. This is partly explained by the fact that the badumptions can be somewhat similar, while placing Tesla under two different sides of profitability. The debates often lead to vague expressions such as "high demand" and "low demand", but I would say that they are fundamentally divided (in all extreme cases) between the belief that Tesla has a lot of demand and the conviction that Tesla has a tonne demand. Of course, I need to clarify what I'm talking about because it's very vague.

A bear case could expect a demand from consumers for 70,000 Tesla vehicles, or 50,000 models 3, a quarter. This is still a very high figure compared to other models in the price range, especially given the relatively limited scope of Tesla stores and service centers (compared to conventional car dealers). But this is significantly less than the more optimistic expectations of consumer demand for more than 100,000 Tesla vehicles or more than 70,000 3 models per quarter. In addition, the difference between expectations may well be the difference between a profitable Tesla and an unprofitable Tesla. (Note: I'm not saying that Tesla must be profitable at this point, and many would argue that it was not, while others say it should not be. must but it's an important dividing line for society right now.)

So, probably the most important and frequent question that will be asked tonight by Wall Street badysts is whether Tesla has a strong consumer demand or a tonne consumer demand. Of course, the formulation of bears and critics will be more negative than that. What is the answer?

Nobody really knows. Tesla, of course, has the most insight on the subject because it has detailed information on order rates, the demand accumulated in different markets, geographic trends, and so on. Analysts will try to get such detailed information, and Tesla will not give them anything. as it has been for years. But even Elon Musk and leading consumer demand experts at Tesla can only guess. Nothing is static and the future is unpredictable. Tesla has grown so fast and so changed from week to week that there is still no steady-state data to use for firm forecasts. In addition, Tesla's reputation, especially its products, is still low, but it will change rapidly (probably exponentially) as people pick up their cars and show them to their friends, family, colleagues and the people on the street. This word of mouth has been an important driver of new demand and will continue to be so. How many? We do not really know. Even Elon Musk basically said, "Well, I do not have a crystal ball." (That's not an exact quote.)

Historically, bulls have sometimes been too bullish and bears are sometimes too bearish. Sometimes even bulls are too bearish or bears are too bullish. In recent months, there has been a dramatic case of false expectations. In the first quarter and most of the second quarter, demand expectations for the second quarter were very weak. Tesla was shocked by a dramatic quarterly record of production and deliveries. I think it has put most people in a more open state of mind about what the future holds for them. It is unclear whether this will be a normal quarter, if sales (shipments) will continue to grow as word of mouth grows and new markets open, or if Tesla's demand reaches its peak. will struggle to match these numbers in the second quarter.

Again, the important point that we all too often forget is that the difference between most bulls and most bears is a difference in expectations between many requests (model 3 would probably still be the No. 1 car in its US category and some European markets) and one tonne demand. As for the objective comparisons of the Model 3 and other cars, a ton of requests seems to me quite logical – the Model 3 is a much better car than the BMW 3 Series for a cost of ownership equivalent to that of a Toyota Camry or a Honda Accord. , or even a Toyota Corolla or a Honda Civic. However, how many people really know it? Humans are not known to be very rational actors and the automotive market is full of superficial, emotional, emotional, identity-centered advertising.

So, will we answer "the question of demand" tonight? Of course not.

Will consistent bears or bulls change their minds about consumer demand and the future of Tesla? I would bet against that.

What's left of the rest of 2019? Who knows? What about 2020? Who knows?

The opinion I still have and continue to affirm is that Tesla's demand will be obscurely strong in the long run because of the superiority of its vehicles and Tesla's future on batteries and software (including including autonomous driving technology). However, guessing between a short-term and medium-term demand for 70,000 models 3 per quarter versus 100,000 – or whatever – seems a little impossible. How many people do they know about Tesla, have they learned the benefits of Tesla vehicles, and have they actually experienced these vehicles? How many of these people are able to buy or rent a car right now? How much are waiting a little longer?

Until such issues are resolved, there will be great pressure between the bears and the bulls. And these issues will not be resolved until at least a few quarters, probably several. In the meantime, expect all kinds of forecasts based on nothing more or less substantial. These different forecasts will divide Tesla's close adherents and will probably lead to a roller coaster.

Keywords: EV Sales, Tesla, Tesla Model 3, Tesla Model 3, Tesla Model S, Tesla Model S, Tesla Model X, Tesla Model X, Tesla Model Y, Tesla Sales

About the author

Zachary Shahan Zach tries to help the society to help herself (and other species). He spends most of his time here CleanTechnica as director and editor. He is also the president of Important media and the director / founder of Obsession EV and Solar love. Zach is recognized worldwide as an expert in electric vehicles, solar energy and energy storage. He has lectured on clean technologies at conferences in India, the United Arab Emirates, Ukraine, Poland, Germany, the Netherlands, the United States and Canada.

Zach has long-term investments in TSLA, FSLR, SPWR, SEDG and ABB. After years devoted to sunscreen and electric vehicles, he simply has confidence in these companies and has the impression that they are good clean tech companies in which to invest. But it does not offer any professional investment advice and can not be held responsible for your loss of money, so do not rush.