There are lies, damn lies and statistics. At various points over the last year or so, I have been reading variants of this most recent article from Bloomberg:
This article purports to show that Tesla (NASDAQ:TSLA) is somehow clobbering other premium automakers such as BMW (OTCPK:BMWYY), Mercedes (OTCPK:DDAIY), Jaguar and others. It is a master-stroke in finessing the statistics to their most ridiculous degree.
The Bloomberg article takes one particular quarter, in one particular geography, and compares the Tesla Model S with tiny snapshots of some of the worst individual performers from inside the competition's vast vehicle portfolios. The conclusion from this is that Tesla is somehow clobbering the competition.
In truth, Tesla's competition laughs at this description, because it entirely misses the actual numbers that really matter: For the first nine months of 2016, Mercedes outgrew Tesla 9:1 and BMW outgrew Tesla 5:1. Companies such as Mercedes and BMW are hardly taking a beating from Tesla, as they are handily outgrowing Tesla while doing so very profitably.
Before I show you the raw numbers, let me explain to you some of the other reasons why the comparison Bloomberg is presenting is somewhere between skewed and absurd.
First, the name of the table is "US Large Luxury Sedans."
The Model S is not a sedan. It's a hatchback. With relatively modest rear seat space and comfort, compared to even much smaller and less expensive cars.
That leads us to the other fundamental critique of Bloomberg's methodology. The current car buyer has clearly shown a preference for switching from sedans to various forms of crossovers and SUVs. In many cases, a car is hard to classify as a hatchback, crossover or SUV.
For example, Mercedes has been losing sales among its sedans, in favor of selling more GL-class cars, such as GLS, GLE and CLC and so forth. Still, Mercedes is growing sales on a net basis to the tune of 12.2% anyway.
For example, sales of the Mercedes S-Class is down 18.1% this year on a global basis - but SUVs are up 42.2%. Do you think Mercedes thinks that this is a bad thing or a good thing?
Mercedes may also have lost sedan sales to crossovers and SUVs from other automakers, such as BMW, Volvo (OTCPK:VOLVY) and Jaguar or whomever. All automakers have seen their crossover and SUV models gain share at the expense of sedans.
It is, therefore, completely deceptive to compare Tesla's hatchback to the particular cars inside of companies such as BMW and Mercedes who are losing market share anyway, regardless of whether Tesla exists or not. You have to look at companies such as BMW and Mercedes as a whole - not just one or two models in one country and in one quarter.
The table as presented in Bloomberg gives the impression that BMW and Mercedes are somehow on their knees, begging for mercy and having been clobbered by Tesla's hatchback sales juggernaut. But let's take a look at the actual numbers:
ratio to Tesla
As you can see in the table above, reality is completely different. To be sure, Tesla has shown one of the industry's largest growth rates on a percentage basis in 2016, at 62%, but it's on such a small base that it is of little noticeable impact to BMW and Mercedes, for example. If you're as tiny as Tesla is, you had BETTER grow fast on a percentage basis.
Tesla grew sales during the first 9 months of 2016 to the tune of 20,532 cars over the previous year. BMW grew 101,828 and Mercedes 179,174.
Let that sink in for a moment.
Mercedes outgrew Tesla to the tune of essentially 9:1, and BMW to the tune of 5:1.
Let's also keep in mind that Tesla is only being able to sell as many cars as it does, because it's pricing them at a huge loss. Tesla has been losing close to $25,000 per car, in recent reported quarters. In any case, it's a lot less profitable than BMW and Mercedes, just to pick two of many automakers who are eminently profitable.
Once you relax that pesky little constraint about not selling your product - on a portfolio-wide basis - at a profit, all sorts of things immediately become possible. How many more cars do you think BMW or Mercedes would sell if they would cut their prices by, say, $25,000 per car? Yes, their sales would go through the roof.
The message here is very simple: Tesla is growing sales - as it should, given that it's a tiny company - but BMW outgrew Tesla year-to-date by a 5:1 ratio, and Mercedes outgrew Tesla by a 9:1 ratio. Those are the cold hard facts.
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 short TSLA. However, positions can change at any time. The author regularly attends press conferences, new vehicle launches and equivalent, hosted by most major automakers.