How Jaguar Outgrew Tesla In 2016

| About: Tata Motors (TTM)

Summary

Tesla famously grew unit sales in 2016 by 50% globally. However, one larger brand grew even faster.

Jaguar handily posted a larger growth rate both inside the U.S. and internationally, compared to Tesla, for 2016.

Tesla’s growth rate saw a dramatic deceleration in the December quarter. Jaguar saw its growth rate accelerate every quarter throughout 2016.

Both Tesla and Jaguar started selling its first SUV in meaningful volumes in 2016.

Jaguar goes head-to-head with Tesla in electric cars starting in 2018. Meanwhile, 2017 could see a deceleration in the growth rate for both brands.

Tesla (NASDAQ:TSLA) is trading at a stratospheric valuation - an infinite multiple on non-existent annual profits - mostly because of its perceived superior growth rate, as measured by units of cars sold. In 2016, Tesla grew its unit sales by 50%, from 50,658 cars to 76,233.

It is natural that a smaller car company grows much faster than the overall market, especially if it is to deserve a premium valuation multiple in the market. So of course Tesla cannot be expected to grow 5% or even 10%. The growth must be much higher. 50% is certainly one of the highest numbers in the automotive industry.

However, it is not the highest growth rate.

And a higher growth rate can be found not in a car brand that's even smaller than Tesla. It can be found in a larger and more established one.

In fact, it can be found in a brand that in 2016 was approximately twice the size of Tesla. And yet, as the evidence will show, it handily out-grew Tesla.

Let's take a look at global unit sales for both brands - Jaguar (Tata Motors (NYSE:TTM)) and Tesla:

Global Jaguar

Global Tesla

Global sales

2016

2015

change

2016

2015

change

1Q

29854

19401

54%

14810

10045

47%

2Q

31797

18108

76%

14402

11532

25%

3Q

41706

22646

84%

24821

11603

114%

4Q

45364

23831

90%

22200

17478

27%

TOTAL

148721

83986

77%

76233

50658

50%

As you can see in the table above, while Tesla grew 50%, Jaguar grew 77%. Looking throughout the 2016 year, Jaguar's growth rate increased every quarter in 2016: December grew faster than September, September grew faster than June, and so forth.

Tesla had a far more choppy growth profile in 2016. By the end of the year, Tesla's growth rate had fallen to barely half (27%) of the annual average (50%).

It is widely acknowledged that Tesla's most important market is its home market, the U.S. It is where it is selling far more cars than in any other country. In fact, in 2015 it sold half of its cars in the U.S. and in 2016 it was over 58% of total sales. All of the numbers I am using for Tesla's U.S. sales come from InsideEVs.com, widely considered to be the best source for estimating Tesla's U.S. unit sales on a month-by-month basis.

So given all that, the U.S. being Tesla's home market and all, did at least Tesla out-grow Jaguar in the U.S. in 2016? Let's look at the numbers:

US Jaguar

US Tesla

US sales

2016

2015

change

2016

2015

change

1Q

4997

4336

15%

8790

4700

87%

2Q

5994

3500

71%

10240

6900

48%

3Q

9358

3380

177%

14939

5406

176%

4Q

10894

3250

235%

10700

8410

27%

TOTAL

31243

14466

116%

44669

25416

76%

As you can see in the table above, Tesla did indeed post a most impressive growth rate in its home market, the U.S., in 2016. It was 76%, again using the InsideEVs.com estimates, which historically have proven extremely accurate with an impeccable track record going back at least to when Tesla started selling the very first Model S.

However, as good as Tesla's 2016 U.S. growth rate of 76% was, it paled in comparison to Jaguar's 116% growth rate. Also, as with the global sales numbers, consider how the 2016 year progressed for the two brands: Jaguar started out with a 15% growth rate, which went to 71% and 177% and finally culminated in a 235% growth rate. That's a straight up-and-to-the-right growth curve. Rocket growth!

Tesla, on the other hand, saw its weakest U.S. growth quarter at the end of the year. 27% was way below the 76% annual average. Does this mean that Tesla's growth has been exhausted, at least until the Model 3 arrives, perhaps somewhere between the end of 2017 and 2018-2019? We will find out in early 2017.

Fun fact: At 31,243 cars, Jaguar's 2016 U.S. sales number was almost exactly to the millimeter equal to the number of cars Tesla sold outside the U.S. during the same time period (31,564).

Speaking of international sales (from a U.S. perspective), then, how do these companies compare on that front? We can derive those numbers simply by subtracting the U.S. numbers from the global numbers:

Int'l Jaguar

Int'l Tesla

Int'l sales

2016

2015

change

2016

2015

change

1Q

24857

15065

65%

6020

5345

13%

2Q

25803

14608

77%

4162

4632

-10%

3Q

32348

19266

68%

9882

6197

59%

4Q

34470

20581

67%

11500

9068

27%

TOTAL

117478

69520

69%

31564

25242

25%

As you can see in the table above, the growth discrepancy between Jaguar and Tesla is very large here as well. Tesla grew 25%, but Jaguar again trounced it with a 69% growth rate, almost 3x Tesla. On an absolute basis, Jaguar is now almost 4x as large as Tesla outside the U.S.

What have we established here? Three things about 2016 unit growth:

  1. Tesla grew 50% globally; Jaguar grew 77%.

  2. Tesla grew 76% in the U.S.; Jaguar grew 116%.

  3. Tesla grew 25% internationally; Jaguar grew 69%.

I think those numbers speak for themselves. Jaguar is outgrowing Tesla even though it was approximately twice as large as Tesla in 2016. Jaguar also showed an increasing growth rate throughout the year in comparison to Tesla whose growth rate fell dramatically in 4Q.

So, why did Tesla lose so badly against Jaguar in 2016?

Someone will point to Jaguar's industry-leading success and say it was because it launched new and successful models, in particular its first SUV, the F-Pace. Of course it was!

But guess which other company also launched its first SUV in 2016? Yes, Tesla, with the Model X. And yes, I know - the Model X technically started deliveries in late 2015 - all 214 units of them. That's what in the auto industry usually constitutes a test fleet. So really, by any normal industry standards, Tesla started proper consumer volume deliveries (delivering over 1,000 units) in 2016.

Fun fact: About this new Jaguar SUV, it constituted 42.4% of Jaguar's U.S. sales in December. Furthermore, 25.6% of those SUV sales were diesels. That means that almost 11% of all of Jaguar's U.S. sales in December were SUV diesels. Bet you didn't know that!

What about the next steps?

Jaguar and Tesla both have big plans for 2018. Tesla hopes to be able to finish building and testing the Model 3 assembly line so that it can make more than a few hundred units of Model 3 test cars. Jaguar will start selling its first all-electric car, the i-Pace.

But that's 2018. What will happen to the growth rates for these two brands in 2017, as compared to 2016? My sense is that both will fall from 2016. Just to be clear, I think both brands will show an increase in the absolute number of unit sales, but I think the rates of growth will decline from the very high 2016 numbers.

Meanwhile, as far as 2016 growth over 2015 is concerned, let's be clear: Jaguar handily out-grew Tesla not only in the U.S., but also internationally and therefore globally as a whole.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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 did not have any positions in the companies mentioned. However, positions can change at any time. The author regularly attends press conferences, new vehicle launches and equivalent, hosted by most major automakers.

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