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What would worldwide Model S sales be without subsidies??

Discussion in 'Model S: Ordering, Production, Delivery' started by AustinPowers, Oct 14, 2014.

  1. AustinPowers

    AustinPowers Total Smeghead

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    I don't know whether this has been asked before, but an idea got me thinking the other day:

    Model S sells best in the US, Norway, Netherlands and China. All of those are countries that (heavily) subsidize EVs, making Model S a very attractive proposition.

    In countries like Germany otoh, Model S sales are quite lacklustre, "thanks" in a large part to missing EV subsidies over here.
    That made me think, how would Model S sales look like if it weren't for those large subsidies in the aformentioned countries. Would Model S still be a big hit in Norway or the Netherlands for example? I am really curious as to what the situation would be.
    Sure, Model S is a great car. But would you have bought it if it weren't for the subsidies? In other words, would you have been in the market for it anyway?

    Perhaps some of our Norwegian or Dutch members could share some insight?
     
  2. doctorwho

    doctorwho Member

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    No subsidies in Australia, in fact the car attracts a 'luxury car tax'. This Australian Government would subsidise it if it ran on coal though. Prices start at around $100k here so it won't be a volume seller.
     
  3. ToddRLockwood

    ToddRLockwood Active Member

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    Technically, Tesla is not "subsidized" by the U.S. government. The income tax credits some customers can take advantage of go to the customer, not to Tesla. Would this be a deal-breaker for a car in the $75K to $125K price range? I doubt it.

    The federal tax credit program for electric vehicles was created by the U.S. Department of Energy as a way of encouraging adoption of electric transport.
     
  4. AustinPowers

    AustinPowers Total Smeghead

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    Ok, perhaps my wording was a little off. By subsidized I didn't mean that the company gets the money, but the customer. Which is especially true in Norway and the Netherlands. The situation might be different in the US also because Tesla is an American company, which will certainly account for some patriotic buyers who don't care about the pricetag anyway but who care about the car being "non-foreign".

    But again, I was thinking more about the situation here in Europe, as in Norway / Netherlands, as well as China, vs. countries without EV incentives, if that is a better word (I'm a non-native speaker of English after all).
     
  5. mibaro2

    mibaro2 Member

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    It will be interesting to see the responses you get from those in Europe. I think Norway is the most committed country to convert people to EV's with incentives.
    As an aside, I still would have bought my car without my government incentive ($8500 ).
     
  6. traxila

    traxila Member

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    This will be a much more fair question going forward. Up until now discriminating upscale buyers used to luxury rides would find much to criticize based on the MS lack of features compared to competition. Personally, I consider them uninformed, as there is no substitute for an electric drivetrain, torque, acceleration etc., not to mention the whole alternative energy thing (but honestly, very few people really give a rat's ass what shape the world is in after they check out).

    But now Tesla is about to produce what I believe will be the most convenient, exciting and all around best production car in the history of the industry. The only critical argument left will have to do with range and charging etc. For many people, this is simply not an issue. Quite the opposite, as a full charge every morning... Well u get the pic. My expectation is that demand will be overwhelming once they hit the road, regardless of whatever subsidies are or are not in place.

    As a Sig X holder, it really makes me wonder how long I might have to wait if demand spikes for the MS. Or my wife that is. I got a MS85, which is and always will be a sweet ride, creature comforts aside. Have to admit, did miss AWD last winter. Very much hope that will not be the case this year.
     
  7. Alfred

    Alfred Member

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    Hard to tell. Tesla sales are still supply constrained. As Switzerland has no car industry, it is often regarded as a neutral test market. There is no support that would lower sales prices either. It is a bit early for a definite picture, but Model S sells probably a bit better than other large luxurious cars here.
    You could take as a guideline a percentage of sales of top line large cars as a first estimate. Note that size matters just as much as costs as a market limiter. If you cannot park or get out of it when parked, or after negotiating narrow roads in the mountains and around medieval cities, you might get second thoughts. From discussions with owners I have the impression that lack of features was never an important consideration in their decision. Mentioned was occasionally the absence of Mercedes type cruise control and grips to hold on to above the windows, but that was about it.

    Germany is rather atypical and has a very strong domestic brand bias for all cars. In addition about 2/3 of all cars there are bought by companies for their employees on medium term contracts. To break into that pattern will take time and will have political limits for a foreigner.
     
  8. AudubonB

    AudubonB Mild-mannered Moderator Lord Vetinari*

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    The economist's answer to your question is "a lower number". The demand curve of a Model S is normally sloped - greater when the ultimate cost to consumer is lower; smaller when otherwise.

    All right, you knew that already and were more interested in "by how much". We do have a small number of tools to assess that. First, in that we already have had a variety of prices, within a given market, for the vehicle, by a reasonably laborious process we could construct a Price Elasticity of Demand curve. However, only TMC can do that with anything resembling the degree of precision necessary truly to obtain that, because only they have the specific order book - we have only quarterly sales data, which incorporate a number of other uncontrollable variables, most notably shipment slop. A second tool available is the price difference amongst different markets; one can interpolate and extrapolate those data to create a curve. These data need be very carefully controlled for different buying habits, which include inter alia the kinds of parameters Alfred supplied in post #7.

    Now, to give you some sense of the relative inelasticity of the demand curve, this USA consumer purchased his Model S without taking advantage of any of the $7,500 tax rebate offered by the US government. Call it a donation to our national debt, call it naivet​e, call it what you will, but it's one datum to use.....
     
  9. dsm363

    dsm363 Roadster + Sig Model S

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    What would it be if there were no oil subsidies? The number would be lower without EV subsidies but at this price range I don't think it would be a deal breaker for most.
     
  10. EarlyAdopter

    EarlyAdopter Active Member

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    I suspect that without subsidies, last year Tesla could have only sold 40,000 Model S's rather than 50,000.

    Of course, that's all moot as they were only able to manufacture 22,000 of them...
     
  11. green1

    green1 Active Member

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    This is exactly the situation, without subsidies Tesla would have delivered exactly the same number of vehicles. The demand outstrips the supply by a much larger margin than any effect a subsidy (that's generally less than 10% of the vehicle price anyway) would have.
     
  12. AustinPowers

    AustinPowers Total Smeghead

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    Well supply constraints aside, I thought the effect of incentives would be far greater.
    Take Norway for example. I try to imagine what Model S demand would be over here if we had incentives like that. Perhaps then Elon's goal of selling 10.000 Model S a year in Germany would be possible. Unfortunately our politicians are even more short-sighted than they are lobby-infested. Hell, even China is more forward thinking in that respect. Hard to believe, and really annoying.

    But back to the original topic. So the general consensus seems to be that without incentives demand wouldn't be much lower because for buyers shopping at that price point the effects of incentives are more or less negligable?
     
  13. EarlyAdopter

    EarlyAdopter Active Member

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    I think the effects of incentives are quite considerable actually, and without them demand would be much lower. It's just that demand is so much greater than supply that it wouldn't have had an impact on the number of cars sold.

    The fact that Tesla has raised prices three times since I purchased my car nearly two years ago, to the tune of $20,000 more, while ramping up production at the same time is good evidence of this.
     
  14. Bucephalas

    Bucephalas New Member

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    The incentive program in Norway is undoubtably the main reason for the success of the TMS in Norway. An attempt at an explanation, comparing Norway and the US:

    Looking at some quick and dirty statistics, the comparative median income per household is not hugely different in the US vs Norway, but the cost of buying a car is very different. (Have a quick look at some basic comparisons here; Cost Of Living Comparison Between Norway And United States)

    Yes, people make a little more money in Norway, but it's not a huge difference. Infact, it looks like the difference is about 20 % in Norways favour.

    The cost of buying a car in Norway is (normally) very high vs the US. Some fairly current numbers on comparable cars (just pulling quick numbers from the base offering, no extras added):


    • Mercedes Benz E 250 BlueTec sells for 51 400 USD in the US, while the same car goes for 103 500 USD in Norway.

    • Audi A6 (cheapest possible configuration) starts at 44 800 USD in the US, and at 88 500 USD in Norway.

    So, in general, you will notice that cars are more or less twice as expensive in Norway as compared to the US (for imported premiums in this case).

    Looking at the current pricelists in the US vs Norway for a base S85, the prices are 79 900 USD and 93 300 USD, respectively. Still a difference, but the gap has narrowed substantially. Relating it back to the median income, the difference is only 16 %. So, relatively speaking, you could argue that a TMS is cheaper to buy in Norway than in the US. How did THAT happen??!!

    The reason of course, is the incentives.

    When buying an electric car in Norway, you essentially pay no taxes or VAT. These are high in Norway, and I won't go into how they are calculated, but suffice to say that they generally double the price of the car.

    Adding on to this, electric vehicles pay a very reduced annual road tax, they can use bus-lanes, charging is largely still free (and the SC network is growing very nicely), and tolls and ferry carges on public roads are also free. Electricity itself is dirt cheap compared to gasoline/diesel, so summed up, the cost of owning and driving a TMS is next to nothing.

    If you took these incentives away, it's hard to say exactly what a TMS would cost. It wouldn't be twice as much, due to how taxes are calculated, but it would go up at least 50 %, probably closer to 75 %. And that would just not be competitive, if you compare it to the German rivals in the premium market. It would become a novelty car, something only the die-hard enthusiast would buy, or the wealthiest 10 % maybe, up there with the high-end sportscars pricewise.

    With the incentives however, it's well within reach of the upper middle-class segment of buyers in Norway, and they have been running down the doors at Tesla to get their hands on what is arguably a superb car for that kind of money (in Norway).

    So, TL;DR: Incentives is the main reason why the TMS is a success in Norway. You would still sell a few here without the incentives, but not enough to make any headlines anywhere.
     
  15. 1ar

    1ar New Member

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    I live in Norway and as mentioned the Tesla model S is I hugely popular car here, together with the rest of the electric cars on the market.

    The price for a reasonable specced S85 is approximately $100k. For this kind of money one ICE alternative is BMW 5 series with the second smallest engine and a little extra equipment.
    $100k is a lot for a car in Norway as well, it is just that we are used to very high car prices.

    Even though the saving per year in gas is $4k for me, I would never be able to buy the car without the tax exemptions. This is valid for the majority of Norwegian tesla owners.

    If the S did not have the tax exemptions here, the car would be in the price range $200k +.
    Having said that, the taxes here does focus some on the CO2 pollution, so it would still be cheaper than a similar ICE car. This would however be out reach for most of the customers today, me included.
    The alternatives for me were VW Passat, Volvo V60 or Tesla. Due to the saving in gas and road tax the cost is pretty similar in a 5-7 year perspective.
     
  16. GOVA

    GOVA Member

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    I am going to ask same question but in regards to gasoline cars/Oil Industry. Many are not aware that OIL industry is very heavily subsidized at least in the US of A.

    Now, what would happen if this weren't happening? I guess, Tesla cars would sell 10x more.
     
  17. neroden

    neroden Happy Model S Owner

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    This! I sometimes start to regret getting an early model car, because of the new features -- but then I realize that the base model has vastly increased in price since I bought it, so I got a good deal.
     
  18. Dutchie

    Dutchie Member

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    I don't think the Model S would have sold very well without the subsidies. If you bought one last year and have it put on you company's name you would have driven the Tesla for about 25% the value of the MS! Just imagine getting a Models S for the price of a Ford Focus or something similar. On top of that you don't have to pay road tax, which is also quite significant there. No wonder a lot of Dutch people jumped in!
     
  19. eco5280

    eco5280 Member

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    I know I wouldn't be buying right now without the $13,500 I'm getting off the price (Colorado). Nor would I have likely leased the Nissan Leaf for the last 20 months. Nor the hybrid Lexus I bought before that.

    The tax credits are working. They are allowing a technology to grow and develop economies of scale, and in the process replacing vehicles on the road with more efficient models. It's a few billion for the federal tax credit - I think the total budget is $7.5B over it's lifetime which ends in 2019. That's a whopping $25/citizen (TOTAL over 9 years, so $2.78/yr). People who complain about government spending need to think about how much they really spend on the big ticket items before complaining about stuff like this.
     

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