Tesla's Spectacular International Sales Collapse

| About: Tesla Motors (TSLA)

Summary

Why isn't anyone talking about the dramatic fall in Tesla's international sales? It's down by more than half in six months.

Tesla's top-five countries in Europe were down by over 19% in 2Q compared to 1Q.

Tesla's best country in Europe used to be Norway. Sales there are now down to 43 (yes, forty-three) units in the last month. Practically zero.

In this recent period, Volkswagen, Audi, Nissan, Renault, BMW, Volvo and Mitsubishi have clobbered Tesla in terms of plug-in car sales in some European countries.

And this is all before the Big Kahuna of plug-in cars has hit the market, the Chevrolet Bolt, which will be at least a year ahead of Tesla's Model 3.

There is one critical statistic in recent Tesla (NASDAQ:TSLA) reports that has not gotten much, if any, attention. And that's Tesla's shrinking international sales.

One key reason for this is that Tesla does not break out international sales in its quarterly reports. If you are just looking at Tesla's quarterly shareholder letter, you will not find this trend.

However, a very good estimate of this number is easily obtainable. Inside EVs has for years been considered the best estimator of Tesla's U.S. sales numbers. It has been remarkably accurate by all accounts every quarter since Tesla started delivering the Model S in 2012. I don't know a single bull or bear who disagrees on this point.

The Inside EVs' numbers can be found on this page.

With that in mind, let's take a look at the Tesla international vs. domestic sales trend:

US units

cars sold

US %

international

2Q 2016

10,240

14,402

71%

4,162

1Q 2016

8,790

14,810

59%

6,020

4Q 2015

8,410

17,478

48%

9,068

3Q 2015

5,406

11,603

47%

6,197

2Q 2015

6,900

11,532

60%

4,632

1Q 2015

4,700

10,045

47%

5,345

Click to enlarge

As you can see in the table above, Tesla's international sales averaged 50% in 2015 in a more or less relatively steady manner. Three quarters were at 47-48%, and one at 60%. The average is 50%.

But then, in the first two quarters of 2016, Tesla's international sales fell off the rails. The June 2016 international sales were less than half of the 2015 exit rate.

Think about that for a moment: Tesla's international sales fell by more than half in just six months - comparing 2Q 2016 with 4Q 2015. In the most recent quarter - June 2016 - it was only 29% of the total. Last December, it was over half of total sales.

An optimist would say that the other side of the coin is that U.S. sales have done very well. That would be true - Tesla's U.S. unit sales basically doubled over the last year-and-a-half.

Still, in the very most recent month - July 2016 - Tesla got positively clobbered by Jaguar (NYSE:TTM) in terms of U.S. sales. Tesla sold 2,900 cars in the U.S. per Inside EVs, up 81% from the prior year. That's certainly very good!

However, Jaguar made Tesla's U.S. unit growth rate in July seem like a GDP growth number from the Soviet Union. Jaguar sold 3,398 units in the U.S. in July, up a whopping 174% from last year's 1,242 units.

In other words, Jaguar is now showing a U.S. growth rate that is more than twice Tesla's, and even the absolute number is now higher than TSLA - whereas a year ago, it was smaller. And who wants to bet that Jaguar isn't losing $20,357 per car sold either?

But back to international sales for a second. What is going on with Tesla's international sales falling by more than half in six months?

Looking at European car registration data for the first six months of 2016, here are the biggest five countries for Tesla (units):

2016 1Q

2016 2Q

%

UK

762

652

-14.44%

Norway

705

546

-22.55%

The Netherlands

530

353

-33.40%

Germany

396

362

-8.59%

Switzerland

430

362

-15.81%

2823

2275

-19.41%

Click to enlarge

As you can see in the table above, these numbers and trends can only be described as pathetic. They are pathetic for two reasons:

  1. The absolute level of these numbers is a joke. A whole country selling only 400-800 cars in a quarter? That's 200 cars per month, on average - and falling. And these are the five BEST countries in all of Europe?

  2. The declines, just from 1Q 2016 to 2Q, are massive across the board. Over 19% in the aggregate.

Before 2016, going all the way back to 2013, the star in the Tesla international portfolio was Norway. It just lost the #1 spot to the U.K., but it's by far the country with the highest percentage of cars that plug in. It serves as a representative example to what has happened with Tesla's spectacular sales collapse in Europe, over the last 3-6-18 months.

Here are the July 2016 sales numbers, for plug-in cars in Norway, as well as the year-to-date numbers:

Model in Norway

July 2016

YTD

Mitsubishi Outlander

504

3,347

VW eGolf

279

3,138

Nissan LEAF

237

2,829

VW Golf GTE

412

2,507

VW Passat GTE

294

1,458

Renault Zoe

79

1,309

Tesla Model S

43

1,284

Click to enlarge

As you can see in the table above, Tesla was #7 in the market for the year thus far - among cars that have a plug - with 1,284 cars sold. However, sales in July were anemic at only 43 units. That was not anywhere near the top seven. Other plug-in models from Audi (OTCPK:AUDVF), BMW (OTCPK:BMWYY), Mercedes (OTCPK:DDAIY), Volkswagen (OTCPK:VLKAY), Kia (OTC:KIMTF), Volvo (OTCPK:VOLVY) and Nissan (OTCPK:NSANY) all sold more than 43 units in Norway in July.

In any case, whether we are talking about 43 or 430 units per month, the battle is already lost. The overhead associated with the development and support of these kinds of sales numbers will eat up any gross profit you may or may not have to begin with. This is one reason Tesla is losing $20,357 per car sold.

The bullish argument here would be that none of this matters in the context of Tesla's Model 3, which has been promised for the second half of 2017. I have a hard time finding anyone in the auto industry outside Tesla who believes that TSLA will be able to deliver anything except for what would be considered pre-production units - perhaps placed in hands mostly of Tesla's own employees - by the end of 2017. A date a lot closer to the second half of 2018 seems more realistic for true volume production, meaning tens of thousands of cars sold not to employees, and without chronic quality issues.

In any case, there is little disagreement from this bear about the notion that there is ultimately strong demand for a $35,000 car such as the Model 3. Even if Tesla ends up losing more than $20,000 per Model 3 unit sold, the consumer will surely gobble up a proposition like that. That's what typically happens when someone offers me a dollar for 50 cents.

However, Tesla is now losing the time-to-market war against GM (NYSE:GM), just for starters. The Chevrolet Bolt is scheduled to be in U.S. dealerships by the end of December 2016, and subsequently this GM car will be exported to Europe as the Opel Ampera-E.

Before we get to the Model 3 shipping in any meaningful quantity, the Nissan LEAF 2.0 is also expected to become available, and if all the rumors are true, it seems like it will be very similar to the Chevrolet Bolt. For Tesla, this ought to be an obvious problem: In the near term, it is falling short on sales with the existing models, and for the significantly less expensive model in the future, it will not be first to market - and most likely not even second to market either.

I have been pointing out this dynamic substantially since January 2015 and most recently two months ago in this article.

Bottom line: Bye-bye, international Tesla sales

All this talk a year or two ago about Tesla's sales going to ⅓ Americas, ⅓ Europe and ⅓ Asia looks completely out the window. With the collapse in international sales, Tesla's domestic sales hit 71% in this most recent quarter - June 2016. Volkswagen, Audi, Mitsubishi, BMW, Mercedes, Nissan and Renault (OTCPK:RNLSY) knee-capped Tesla in many international markets, such as the major European markets in general. And neither the Chevrolet Bolt nor the Nissan LEAF 2.0 has yet gone on sale.

You might say that this is at the core of a bearish thesis.

Disclosure: I am/we are short TSLA.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: At the time of submitting this article for publication, the author was long FCAU and short TSLA. However, positions can change at any time. The author regularly attends press conferences, new vehicle launches and equivalent, hosted my most major automakers.