European BEV Sales 2020 - Tesla down to nr 3 and share down by 10%

[GeorgeSymonds]

I’m well aware of discounting to shift euro boxes so that dealers can hit their sales targets and earn manufacturer bonuses. I’m just a bit surprised to see them already doing the same with EVs that have much smaller profit margins. Probably more a compliance thing and selling at a loss.

Franchise dealers must be bricking themselves with the move to EVs. It was already a very marginal business model with ICE sales and service.

it doesn’t sound like you understand it at all. The dealer margin is used to create competition between franchise dealers. Musk wanted control over the “dealers” and to avoid the market mechanics where buyers had choice over where to buy even if it was the same ultimate product. It probably explains why Tesla throw cars at buyers with no PDI etc because you get the same dreadful experience everywhere. If you got treated like that at a VW dealer you’d never use them again but you still might buy a VW just from a different dealer. The list price and discount game is also to give people that feeling they blagged a deal, it’s becoming like the never ending DFS sale but walking out a show room thinking you’ve just saved a month’s salary on your new car feels much better than the soulless experience of three clicks online as if it was an Amazon purchase

 

[Glan gluaisne]

Given that the profit margin on a Tesla is broadly similar to that on any other car, surely it just comes down to how that profit is divvied up, doesn't it?

Buy a Tesla, and all the margin goes to Tesla, as they have no resellers. Buy many other makes of car and part of the profit margin goes to the reseller. With the Tesla model customers have no choice - you have to pay the price the manufacturer has set. With the second model it's unlawful (here in the UK) for the manufacturer to fix the retail price, resellers must, by law, be allowed to vary the price that they choose to sell at.

Broadly speaking, with the reseller model the service you get may depend on the price you pay. For example, I bought a car in 2010 using "Drive the Deal", at a price none of the local dealers could match. The service wasn't as customer friendly as with the main dealer, but was on a par with that from Tesla, in that there was little interaction with Drive the Deal, they had no showrooms etc, and the car was delivered on a flatbed. The next car I bought came from a main dealer, and I negotiated a price with them, they PDI'd the car, did a few little extras I wanted, and the car was fuelled and fully charged when I went to collect it. I paid slightly more than the Drive the Deal price for that car, but that was reflected in both the service and the fact that the dealer was able to get the exact spec car I wanted more quickly.

 

[Type2]

You’re incorrect. The free supercharging was widely known to get people to buy and take delivery.

it’s also wrong to say there were no discounts. All MIC M3 SR+ inventory had about a 10% reduction, there were non in the uk as MIC weren’t shipped to uk then, but in Europe there were plenty. Excess China production sent to Europe to get it sold, if they were sent to meet demand, why discount?. This started in Nov.

Tesla were also discounting 2020 new inventory to shift them, smaller discounts on zero mile cars and bigger incentives on demo cars they needed off their books.

Tesla offers 3 months of free Full Self-Driving package as unprecedented end-of-quarter incentive - Electrek

As well as free supercharging Tesla were offering three months free FSD to try to shift cars by the end of the year. They have this drive at the end of every quarter and especially at the end of the year. Their priority is clearly quantity, not quality.

The problem with a free trial of FSD is that people might be put off by how dysfunctional it is.

 

[GeorgeSymonds]

Given that the profit margin on a Tesla is broadly similar to that on any other car, surely it just comes down to how that profit is divvied up, doesn't it?

I believe the manufacturer margin is the same, but that doesn't include the dealer margin as they're separate companies and have a franchise agreement. You sometimes see "manufacturer incentives" mentioned by dealers which are different discounts to the dealer discount. Essentially companies like VW sell everything to the dealers and they report that margin, the dealers then play with their margins to out bid each other.

 

[jefoth]

The counter argument:

The chart clearly shows the trend line for Tesla to peak around the end of 2019 and start of 2020. Every other car maker suffered from COVID and experienced factory closures. All but PSA show a covid induced weakening in Q2. Tesla were running incentives at the end of the year to desperately boost sales and sell of inventory, they still have 2020 spec inventory for sale, its not like they had nothing to sell.

Your conspiracy theory also doesn't address renault etc or why Hyundai is virtually the same and why PSA have shot up from nowhere.

It doesn't say to me that Tesla is in difficulty, it just says to me that Tesla should be valued around the same as normal car manufacturers which is still massively impressive. Does that chart really suggest to anyone that Tesla is worth the sum of all those car companies, and quite a few not shown, added together?

Time and again the opposite of being a Tesla Bull is to accuse people of being Anti Tesla whereas for me its just bringing in a dose of realism.

There are plenty of investors with a good track record who not only have large investments in Tesla, but who believe the stock will move considerably higher. I remember how Amazon investors were mocked when the company was posting massive losses. After all, selling books online was hardly rocket science. Just wait till the big boys step in they said....

There will be no Tesla killers for at least 10 years, or maybe never. In a rapidly expanding market all players will do fine. When supply starts to catch up with demand the market will consolidate - big boys will take the lion’s share and some niche players will stick around.

However, how many gigafactories can VW afford to build? Repurposing existing ICE factories to EV is neither simple nor is it as productive as a greenfield build. This is the problem that all legacy manufacturers face if they want to seriously scale up.

Considering Tesla’s aggressive growth rate, cash mountain, zero legacy stranded assets, zero legacy pension costs, you’d be brave to bet against them being the future VW of EV’s.

As an aside, it is being widely reported that VW fiddled its 2020 HEV & EV sales figures in order to avoid emissions fines. 65k cars “sold” to dealers, but not to actual customers.

 

[Glan gluaisne]

I believe the manufacturer margin is the same, but that doesn't include the dealer margin as they're separate companies and have a franchise agreement. You sometimes see "manufacturer incentives" mentioned by dealers which are different discounts to the dealer discount. Essentially companies like VW sell everything to the dealers and they report that margin, the dealers then play with their margins to out bid each other.

What I meant was this:

• Say a car costs £30k to manufacture, is supplied to dealers for £35k and they retail it at £40k. The dealer makes £5k and the manufacturer makes £5k.

• For a direct sales operation, like Tesla, with the car still costing £30k to manufacture, and still having a retail price of £40k, the manufacturer makes £10k.

I get that dealers compete with each other, by reducing their margins to increase the volume of sales, and arguably that's better for customers, as there is an element of choice as to how much to pay, perhaps versus the level of service. The key point I was trying to make was that with no dealerships and a price fixed by the manufacturer/direct seller, all of the margin always goes to the manufacturer.

What we don't know is how that compares with other manufacturers. For example, is the total profit margin (dealer profit plus manufacturer profit) for conventional car sales larger or smaller than Tesla's direct sales model?

Looking at data found from a quick web search, it seems that conventional car dealerships make around 50% of their profit from parts and servicing, around 25% from used car sales and around 25% from new car sales. It seems they will probably be looking at taking a big hit on parts and servicing profit as EVs start to dominate, given their lower servicing requirements, but it seems likely that the new and used car sales profits will probably stay roughly the same.

Also from a quick look around the web, it seems that Tesla's average profit per vehicle over the past few years is a bit higher than comparable manufacturers, like Audi, BMW and Mercedes, and a fair bit higher than large volume manufacturers, like Toyota. That suggests that the fixed price, buy direct from the manufacturer, sales model is better as far as the manufacturer is concerned than the dealership model. If Tesla were to switch to a dealership sales model I think the chances are that they might lose around 30% of the current profit per vehicle.

 

[Peteski]

You’re incorrect. The free supercharging was widely known to get people to buy and take delivery.

it’s also wrong to say there were no discounts. All MIC M3 SR+ inventory had about a 10% reduction, there were non in the uk as MIC weren’t shipped to uk then, but in Europe there were plenty. Excess China production sent to Europe to get it sold, if they were sent to meet demand, why discount?. This started in Nov.

Tesla were also discounting 2020 new inventory to shift them, smaller discounts on zero mile cars and bigger incentives on demo cars they needed off their books.

Well on the UK forum people thought it was a North American promotion only. I ordered my car in November. No sign of any incentives at that point. First I heard of it via Tesla was from a text message on the day of delivery. But obviously I'm "incorrect" and everyone else in the UK was well aware of the promotion for both 12 months free SuC and the FSD trial.

There were no discounts available on the LR I ordered from inventory (2021 model in shipping).

FSD Free trial for 12 weeks

 

[Peteski]

it doesn’t sound like you understand it at all. The dealer margin is used to create competition between franchise dealers.

Dealers compete against each other and they also get manufacturer bonuses for shifting specific volumes. A friend of mine is a BMW dealer principal. Sometimes they would shift a batch of cars for very little profit to hit a bonus target. But of course I don't understand, sure.

 

[Peteski]

The list price and discount game is also to give people that feeling they blagged a deal, it’s becoming like the never ending DFS sale but walking out a show room thinking you’ve just saved a month’s salary on your new car feels much better than the soulless experience of three clicks online as if it was an Amazon purchase

It's entirely a personal thing, but I do much prefer the simple online click to haggling with traditional car salesman and all the BS they try to flog you alongside the actual car.

 

[Mr Miserable]

I think you will find that profit from new car sales for the average dealer are pretty slim. The profit comes from finance and commissions from any extra's they can sell. Most car buyers nowadays are pretty savvy and know that nobody pays the sticker price.

 

[rincewind]

Yes, there's been change even before the push for EVs. It is no longer the case that almost every teenager desperately wants to pass their driving test as soon as they can. I can't remember any of my friends and associates who were still non-drivers by the time they were in their very early 20s, and most of us had a license at 17.

^^ Yes to this. My generation were all raring to pass their test, my daughters generation are the other way around. She's 19, and about three quarters of her friends do not drive.

I'm still of the view though that the hardware on current model 3's is not up to FSD. I think level 4 is some years away yet. I'm also with @Glan gluaisne in so far as I have no desire for FSD. Three years down the line with the model 3 and the TACC still isn't as good as my wife's Golf, as as for the auto wipers don't get me started. TBH If you told a non Tesla owner that the TACC and wipers were not as good as whatever car they are currently driving, the first reaction would be well, how can they be talking about FSD then if they can't get basic functionality right.

 

[Glan gluaisne]

I think you will find that profit from new car sales for the average dealer are pretty slim. The profit comes from finance and commissions from any extra's they can sell. Most car buyers nowadays are pretty savvy and know that nobody pays the sticker price.

Definitely the case that you get a better price if you don't mention that you're paying cash. The profit from finance deals seems to be a significant part of the overall profit, plus there's often an additional commission to the sales person if they sell a finance product.

This makes it well worth looking at the small print of finance deals, to see if there are penalties for early repayment. Some of the finance deals allow repayment early with no penalty, so for a cash buyer these can offer a better overall deal, just get the better price on the finance deal, then pay off the finance early to avoid getting hit for interest.

 

[Peteski]

I think you will find that profit from new car sales for the average dealer are pretty slim. The profit comes from finance and commissions from any extra's they can sell. Most car buyers nowadays are pretty savvy and know that nobody pays the sticker price.

Very true. I’m reliably told the margin on new car sales is only around 2%. It’s a very marginal business model indeed.

 

[Peteski]

Definitely the case that you get a better price if you don't mention that you're paying cash. The profit from finance deals seems to be a significant part of the overall profit, plus there's often an additional commission to the sales person if they sell a finance product.

This makes it well worth looking at the small print of finance deals, to see if there are penalties for early repayment. Some of the finance deals allow repayment early with no penalty, so for a cash buyer these can offer a better overall deal, just get the better price on the finance deal, then pay off the finance early to avoid getting hit for interest.

I did that with the last Porsche I bought. Took out their silly overpriced finance to get a discount off list and then cancelled the finance straight away. The whole process was a complete pita.

 

[GeorgeSymonds]

What I meant was this:

• Say a car costs £30k to manufacture, is supplied to dealers for £35k and they retail it at £40k. The dealer makes £5k and the manufacturer makes £5k.

• For a direct sales operation, like Tesla, with the car still costing £30k to manufacture, and still having a retail price of £40k, the manufacturer makes £10k.

I get that dealers compete with each other, by reducing their margins to increase the volume of sales, and arguably that's better for customers, as there is an element of choice as to how much to pay, perhaps versus the level of service. The key point I was trying to make was that with no dealerships and a price fixed by the manufacturer/direct seller, all of the margin always goes to the manufacturer.

What we don't know is how that compares with other manufacturers. For example, is the total profit margin (dealer profit plus manufacturer profit) for conventional car sales larger or smaller than Tesla's direct sales model?

Looking at data found from a quick web search, it seems that conventional car dealerships make around 50% of their profit from parts and servicing, around 25% from used car sales and around 25% from new car sales. It seems they will probably be looking at taking a big hit on parts and servicing profit as EVs start to dominate, given their lower servicing requirements, but it seems likely that the new and used car sales profits will probably stay roughly the same.

Also from a quick look around the web, it seems that Tesla's average profit per vehicle over the past few years is a bit higher than comparable manufacturers, like Audi, BMW and Mercedes, and a fair bit higher than large volume manufacturers, like Toyota. That suggests that the fixed price, buy direct from the manufacturer, sales model is better as far as the manufacturer is concerned than the dealership model. If Tesla were to switch to a dealership sales model I think the chances are that they might lose around 30% of the current profit per vehicle.

I think we’re in complete agreement just looking at different aspects. I was trying to point out that discounted cars aren’t typically the manufacture discounting but the dealers so when we talk about Tesla margin and then say VW margin and then talk about 10% discounts being available on VWs that’s nearly always on the dealer side.

A related point is that when we compare Tesla margin to VW gross margin we forget that Tesla effectively include the dealer margin, VW don’t. If Tesla load into their gross margin calculation all the dealership costs then that would be more comparable to VW who effectively don’t as the dealers have to account for those costs. The VW sale price to the dealer effectively has those costs included whereas Tesla’s don’t. (They obviously do when you move away from gross margin on individual cars and start looking at EBITDA and net profit but that’s generally not considered in these things).

 

[Glan gluaisne]

I did that with the last Porsche I bought. Took out their silly overpriced finance to get a discount off list and then cancelled the finance straight away. The whole process was a complete pita.

Given that Porsche profit margins are massively higher than pretty much any other brand that seems a bit cheeky of them.

As an example, Audi's average margin is ~£2k/vehicle, Toyota's average margin ~£1.7k, BMW's average margin is ~£3k/vehicle, Mercedes average margin is ~£2.7k/vehicle and Porsche's average margin is a whopping ~£12.7k/vehicle.

Tesla's average margin seems to be around ~£2.2k per vehicle, although it's varied enormously over the past few years, from losing money to making far more than £2.2K per vehicle, and the average is heavily weighted down by the early years of selling cars at a loss. The other companies have a much longer history, so the average margin numbers are far more realistic.

 

[Peteski]

Given that Porsche profit margins are massively higher than pretty much any other brand that seems a bit cheeky of them.

As an example, Audi's average margin is ~£2k/vehicle, Toyota's average margin ~£1.7k, BMW's average margin is ~£3k/vehicle, Mercedes average margin is ~£2.7k/vehicle and Porsche's average margin is a whopping ~£12.7k/vehicle.

Tesla's average margin seems to be around ~£2.2k per vehicle, although it's varied enormously over the past few years, from losing money to making far more than £2.2K per vehicle, and the average is heavily weighted down by the early years of selling cars at a loss. The other companies have a much longer history, so the average margin numbers are far more realistic.

Porsche dealerships seem to have a different business model than most other dealers. Very little discounting or pre-reg sales. Often supply restricted with long waiting lists. Dealership overheads generally higher too with premium showrooms etc. Servicing costs are sky high too. They leverage the brand to the max.

 

[pdk42]

Interesting footnote here... as with all statistics all is not necessarily what it seems. I found this today about VW sales figures.

Hersteller = manufacturer
Handler = dealer

So, 35% of ID.3s sold in 2020 were sold by VW to either VW or their dealers. A massive 57% of e-Trons were sold in the same way! Even the Taycan is at 47%. I guess it's one way to avoid CO2 fines!

Now, I've not researched the source of these figures, so they too could be wildly wrong, or totally out of context, or have a reasonable explanation - take it for what it is!

 

[Glan gluaisne]

Interesting footnote here... as with all statistics all is not necessarily what it seems. I found this today about VW sales figures.

So, 35% of ID.3s sold in 2020 were sold by VW to either VW or their dealers. A massive 57% of e-Trons were sold in the same way! Even the Taycan is at 47%. I guess it's one way to avoid CO2 fines!

Now, I've not researched the source of these figures, so they too could be wildly wrong, or totally out of context, or have a reasonable explanation - take it for what it is!

I was looking at Autotrader a few weeks ago and there seemed to be a lot of new ID.3s available for immediate collection from dealers, which backs up this story to some extent.

 

[Zakalwe]

Interesting footnote here... as with all statistics all is not necessarily what it seems. I found this today about VW sales figures.

View attachment 636648

Hersteller = manufacturer
Handler = dealer

So, 35% of ID.3s sold in 2020 were sold by VW to either VW or their dealers. A massive 57% of e-Trons were sold in the same way! Even the Taycan is at 47%. I guess it's one way to avoid CO2 fines!

Now, I've not researched the source of these figures, so they too could be wildly wrong, or totally out of context, or have a reasonable explanation - take it for what it is!

AFAIK, it's one of the main differences with the way Tesla reports their figures. Other car makers count vehicles delivered to dealers, not sold to end-users. Tesla only records cars delivered to end-users.