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How many Model S cars can Tesla really sell?

Recent discussions here on Torque News have created debate over the viability of the Tesla Model S and Tesla CEO Elon Musk's projected production numbers for the car. If the company produces 20,000 cars in 2013, will it realistically be able to sell them too?


Last week, our own John Goreham penned an article in which he predicted that the major manufacturers' electric cars (Volt, Leaf) would ultimately succeed in the marketplace while small upstarts (Tesla, Fisker) would not. That article can be read here.

As would be expected, John's premise created a lot of buzz and commentary. Those of us in the automotive journalism trade know that anytime we mention certain vehicles in a less than favorable light, we will be inundated by the hardcore fans of that car who will make it clear that they think we're idiots. I myself have said that the Chevrolet Volt is "not all that" and was avalanched by "Voltophiles" calling me numerous names and nitpicking over every detail of my penmanship to find fault. This doesn't just happen with electric cars, of course. An article I wrote regarding the Chevrolet Corvair was also quite controversial, even among other automotive journalists who left commentary on my Facebook and International Motor Press Association threads regarding the article. Such is the nature of journalism.

It is knowing that the same contingent of Tesla fans will likely descend upon me that I delve into that car and its dubious future here. While I have little doubt that Tesla CEO Elon Musk's plans to build 20,000 cars next year are at least viable, it seems unlikely that the company will be able to sell twenty thousand cars in the same time frame.

Can Tesla Make 20,000 Cars?
Although there is ample room for failure, of course, it does appear at least feasible that the company could build that many cars in 2013. It has the facilities, would not need to expand its current workforce by much, and appears to have the supply lines for its needed parts and materials in place. Recent reports and filings by the company, which is relatively transparent now that it's publicly traded, show that batteries, motor parts, and aluminum - the material that makes up about 60% of the car's total - are lined up and already growing. The company has surpassed the 1,000 frame and rolling chassis mark in its production output. Many of the problems that could be expected to happen in these first stages of the car's production have happened or are happening and being resolved now, according to Tesla's Q3 2012 filing (more here).

The only thing that could slow Tesla down outside of an act of nature or similar event would be quality issues as production grows. Looking at Tesla's closest neighbor in the EV business, Fisker, illustrates how heavily this can impact a growing carmaker's mojo. It's very, very likely that Tesla will have at least one recall event during 2013, but if they are lucky, it will happen early on and be quickly taken care of and remedied on the production line before too many units have been affected.

Tesla already has, or at least is well on the way towards putting together, a full production shift for the S. To make 20,000 cars is only about 1,700 cars a month and is well within the capability of a single shift in a 20-day production month. The former NUMMI factory they are utilizing is capable of these numbers many times over if fully utilized.

Deposits As Sales Prognosticators
The most-often cited numbers relating to possible Model S sales are the number of pre-production deposits that have been made with the company. The trouble here is that these are deposits, not purchases, and can be canceled and refunded right up to the point of actual production. Tesla has more than enough deposits and sales, even given the cancelled deposits that inevitably come, to deliver all of the vehicles planned for production this year (about 2,500) and if production reaches 800+ a month in January, then all of the cars being built through to March or April of 2013 have also been sold.

The trouble with using deposits as sales indicators is that they only indicate those enthusiastic enough to put money down well ahead of the expected delivery of the vehicle. The Nissan Leaf, for example, has been produced in such low numbers that sales versus delivery have happened with a considerable lag between the time the customer orders their Leaf and that it actually appears in their driveway. On the other hand, the Chevrolet Volt used early deposits and interest as an indicator of very high sales volumes and over-produced the car to the point that they had a 90+ day glut of inventory and closed production for over a month to allow sales to clear out these large inventories.

The Model S is a car that, at its most base configuration, sells for about $57,400, but indications are that the average sales price will likely be in the $70,000 to $75,000 range. That's nearly twice the price of the Volt and well over twice the cost of the Leaf. Thus the Model S is selling in a very different market from the Chevrolet and Nissan electrics, but not quite in the extremely high price range of the Fisker Karma. This means the only comparable cars to the Model S are standard internal combustion vehicles rather than electrics and perhaps their (very low-selling) hybrid counterparts, making it hard to judge how large this luxury electric car's market might be.

The Elusive Model S Market
Sales volumes in the mid-sized luxury sport sedan market in North America are not large. It's one of the smallest in the overall automotive market, in fact, and is similar to pickup trucks in that brand loyalty is very, very strong. The Model S' uniqueness will certainly mean sales, as early deposits on future production attest. But that will not sustain sales through 2013 and Tesla will have to find many more traditional buyers. Competitive, but established ICE vehicles in the segment, such as the Audi A6 and Lexus GS, don't even sell 10,000 units per year, showing that the Model S has a tough row to hoe.

Add to that the fact that hybrids, the largest of the electrified car market, are less than 3% of the total automotive sales volume in the U.S. and most of them are low-priced Toyota Prius cars - a vehicle that costs 1/3 the price of a Model S. Total battery electric vehicle sales in the U.S., not including low-speed models, is less than half of one percent of the total automotive market.

Distribution will be another big hurdle that the company has begun addressing, but is not likely to overcome in only a year. Tesla has well under two dozen stores in North America. Competitor Lexus has about fifteen times that many outlets. At its current distributorship size (number of showrooms), Tesla would have to move about 1,200 units per showroom per year to meet the 20,000 goal. Assuming all sales are in the U.S. and Canada.

Of course, the company is working hard to get European certification to sell there - and will likely have it before the end of this year, if Musk is to be believed. They are also trying to enter some Middle Eastern and Asian markets, but no time frame has been given on those. Asia will likely happen first, but the Middle East could conceivably be where Tesla would potentially move the most cars in foreign sales. Well-heeled markets in Arabia and Israel have shown themselves capable of embracing electric vehicles at a rate better than others, but are limited in size.

Still, 20,000 units is a lot of (expensive) cars. Even with foreign sales, the company would have to sell most of its production here in North America.

Looking at the numbers objectively, doing what we can to gauge the market, and seeing the number of obstacles to be overcome to achieve Musk's 20,000 unit goal, it's very unlikely that Tesla will be able to build and sell 20,000 Model S cars in 2013. Once all markets are open and the car has been vetted, those numbers could be realistic - maybe in 2014 or 2015.

So while the Model S is an award-winning dynamo of publicity and the company's CEO is a public figure of much repute, the market is not likely going to bear 20,000 electric luxury cars in only one year. This does not reflect badly on Tesla Motors, which in all likelihood will achieve profitability in the next quarter, nor on its larger-than-life CEO Elon Musk, who has a history of making huge, bold claims and (eventually) following through on them. But Tesla fans would do well to remember that quarterly reports are as much a public relations exercise on behalf of the company's Wall Street trading as they are a reporting of the company's financial status.


John Goreham    November 15, 2012 - 10:44AM

I think the smartest move Tesla has made so far is creating his own Point-of-Purchase locations. Let's avoid the word "Dealership." If Elon wants to do good he should commit publically to stop the nonsense of aftersales managers taking advantage of the ignorant by pressing them to buy un-needed warranty extensions, "Paint-sealers", undercoating, blah blah blah. While he is at it he could eliminate the "Destination" fee and the "Documentation fee" that add as much as 10% to the cost of a vehicle at "Dealerships." He would also be wise to buy a Lexus and see the level of service possible at a top-tier automaker and copy all the good things. I have bought cars in the Model S base price range and I have walked out of dealerships that did stupid things like ask me for a quarter for a cup of coffee while shopping for a 370Z Roadster.

whity whiteman (not verified)    November 15, 2012 - 12:34PM

Sorry, I think, the base arguments of this article are nonsens. Selling 20.000 Model S in 2013 should be relatively easy for Tesla. If You watch closer, which countries has wich tax preferences ... (f.e. parts of northern Europe has high taxes on luxury vehicles, not on EVs- that brings the final price of the model S down to a A6 and they have "juice" for free, 98% of the energy from renewable sources). In Germany it will maybe be a success-Story as California You can drive this lane etc...
in the forums You can see, that actually reservationnumbers greater than 8000 are finalizing there orders, and there is Japan, Arabia, Canada,... seen in worldwide sails and the rough predictions of maybe "20.000-30.000 Cars in 2013, it should workout well.. but there is always a rest of risk- shure-...but it is getting smaller from week to week!

Aaron Turpen    November 15, 2012 - 12:44PM

In reply to by whity whiteman (not verified)

I addressed that, Whity. It's nonsense on your part to just disregard what I've written and go on about mystical foreign sales possibilities. Fact is, the company has not won approval in ANY foreign market yet. That takes time. Add to that the delivery lag (2-5 months to ship a car from California to other points on the globe) and the possible sales figures keep shrinking.

whity whiteman (not verified)    November 15, 2012 - 1:22PM

In reply to by Aaron Turpen

@Aaron: I've driven it- in Germany. They told me, it's fully homologated (german plate). Shure, You pointed out good arguments, but overall- it is very, very pessimistic and it seems, that the author doesn't see the complete picture. This whole Teslastory is so huge and so well organized/personalized... they are completely connected in the Valley. If there are any Pro's out there, then in this place, in this constellation. In the last years they always over-fulfilled, always--with one exeption: When they cut down the 2012-target because of quality issues. For me a good sign, but market bashed tesla down... they refuse to see the whole picture! It is a big wave... not a short peak, but a great and long momentum...
sorry, just my opinion.

thanks for Your response!

whity whiteman (not verified)    November 15, 2012 - 3:02PM

In reply to by Aaron Turpen

to be honest: this procedures are on the black side of the moon... maybe You are an insider, but: There was no info at all either the web and/or the conference calls. I know, there are always hurdles, but there is no substantial reason for a non-access to foreign markets.

Aaron Turpen    November 15, 2012 - 3:21PM

In reply to by whity whiteman (not verified)

That's the point, Whity. There WOULD be information in those calls because Tesla would want people to know where it will be able to sell the car, thus bolstering its possible sales figures and hence profit potential.

I didn't say "non-access," I said "no current access." Once they get access, it takes MONTHS to ship vehicles to those markets and put them on showroom floors. That is the point.

whity whiteman (not verified)    November 16, 2012 - 4:07AM

In reply to by Aaron Turpen

if BMW brings a new 5 series to market... do You think, there is a question, if they can sell it in foreign markets? That's nonsens... there will be no country in the world, where the S doesn't go on sale...
beeing realistic is okay, a bit negativ, okay... but You are bashing and You don't see the big picture... sorry

Aaron Turpen    November 16, 2012 - 5:03AM

In reply to by whity whiteman (not verified)

It's you who's being unrealistic, Whity. I've already made my points and my points ARE big picture. It's you who refuses to see the forest for the trees. In 2013 they will likely be able to sell the Model S in foreign markets, as my article states. BUT by the time they do, they will not likely move many models next year because of the time it takes to get the approvals AND SHIP THE CARS.

So, while Tesla could and likely will make 20,000 units (or at least get close) of the Model S in 2013, they will not be able to move (sell) that many. That's the entire point of my article.

I don't hate the Model S or electric cars. But there are those who are so zealous about them that they treat EVs as if they are the new Messiah and ignore all realism. Don't be one of those people, Whity. EVs are going to be a part of our transportation future, yes, and probably a very large part. BUT they won't be for a long time. Even those vested in the industry agree that it will be 20, 30, or more years before EVs even have a sizable chunk of the market. Decades, Whity. In the short-term, the Model S is not going to sell 20,000 vehicles in 2013. It's just not possible. I'd be surprised if they can move that many units in 2014, actually, but at lest at that point it might be possible, globally, for one luxury EV to sell that well.

Rob (not verified)    November 16, 2012 - 6:37AM

In reply to by Aaron Turpen

Arguing about whether the international approval process means that the international shipments won't begin until the second half of the year or the first half of the year is about the least big picture thinking I can imagine. It is petty little picture quibbling.
The big picture is that they have almost a years worth of orders already in place and the rate new orders are coming in is accelerating, the last 2-3 weeks with the Motortrend and Yahoo car of the year awards we have seen order rates exceeding 500 cars per week. They will have enough orders from the US alone for the next 12 months full production, whether or not they are able to ship international orders starting early in the year or they have to wait for later in the year is entirely irrelevant to Tesla's success or failure.

whity whiteman (not verified)    November 16, 2012 - 11:55AM

In reply to by Rob (not verified)

...if anythings runs exponential in this bill (and that's their goal- prod. ramp-up was doubling in the last weeks, the reservations also), numbers will explode. If everythingjust runs in the current pace, we see at least 20.000 Cars in 2013.
Exciting times!

bill (not verified)    November 15, 2012 - 12:53PM

I got my Model S on Saturday. I have been cautiously optimistic for the 2 + years since I placed the deposit. I have also been dubious about some of hyperbolic claims about how this car would change the car world,etc. But now that I have the car, I am a believer. The speed and handling are amazing. The electronics make my 2012 Audi Q5 look like an IBM PC running DOS. Oh, yeh, and it's electric. Any doubters have got to drive the car, see the interior and use the systems. By the way, for Thankgiving, we are taking our 2 kids and out pair of 70 pound dogs on a 180 mile trip in the Telsa because it is much more roomy and comfortable than our Q5.

bill (not verified)    November 16, 2012 - 4:23PM

In reply to by John Goreham

I don't know what a bio email is. My VIN # ends in 00658. I will add some photos over the weekend. A few very cool things about the car...

First, when I test drove the car, I was underwhelmed by the interior and a bunch of the electronics were not functional. So I was quite pleasantly surprised - thrilled actually - that the fit and finish is as nice as any car that i have been in. The sound system is great. I loaded 3,000 songs and the way the system organizes the music is beautiful and seemless, with (of course) touch screen selections. Album art is shown for everything by the system going out to the net using the car's 3G.

The traction control is night and day better than my Lexus and my wife's Audi. Supposedly this is because the digital to electric system has much better response time than the digital to ICE.

Speed is truly jaw dropping (I have the performance model).

The organization of the screens is so well done and they can be rearranged on the fly.

The charging system is brilliant. Once plugged in, the car tells of the voltage and amperage of the outlet that it is plugged into, so if you have a poor connection, you know it.

As far as range goes, if I drive conservatively, I can get 250 miles with everything on - heat, seat warmer, radio, nav. The first few days I probably got more like a 210 mile range because I kept showing people the acceleration. The fun thing is that when you floor it and get crappy mileage, the cost to "refuel" is 1/4 to 1/6 of current gas prices - quite liberating and fun.

Complaints are realy few. The door handles are so cool, but they take a little getting used to. Once in a while I need to unlock them with the Tesla key. Small suggestions (like adding the ability to use Homelink when in reverse so that I can close my garage as I back up) Tesla says will get implemented. My 3G is slow, but getting worked on. I learned yesterday that in a future update, the car will be able to work off my 4G phone - which in the NY Metro area is widespread.

I love this car!!!

John Goreham    November 20, 2012 - 8:02AM

In reply to by bill (not verified)

At the bottomof the TN page is a link to the author bios. We have drop box e-mails there. Thanks for sharing the VIN. It likely means that Tesla is now up to 658 vehicles in customer's hands, which nobody has reported as far as I know. And I know. Here is the link:
Thanks again for sharing. Please stay in touch.

Anonymous (not verified)    November 21, 2012 - 8:03AM

In reply to by John Goreham

You're welcome.

The flaw in so much of the reporting and any of the reactions of the public is that people who don't have a modelS or who have not lived with it for a week don't understand that it is not another electric car. It s the best luxury car out there and It's electric.

A Nissan Leaf or Volt is a compromise car. A Model S compares to an M5 or Panamerica. It has no electric comparables, which really is the point: Tesla will sell many more cars because soon the broad market will understand that it's a no compromise awesome car that makes other cars in its price range feel outdated.the aren't s all car buyers in the 50k to 100k price range, not electric car shoppers suffering from Eco guilt.

Anonymous (not verified)    November 15, 2012 - 3:35PM

I think the reason people are "nitpicking over every detail" is because a lot of the details tend to be wrong. I am not a fan of Tesla or EVs per se either.

Simply punching the correct numbers into a calculator when you are writing, I wouldn't call "nitpicking over every detail". To make 20k cars in 2013 Telsa is going to have to produce appproximately 1660 a month not "800" as you claim.

I didn't even read through your article completely...

Anonymous (not verified)    November 16, 2012 - 12:21PM

In reply to by Aaron Turpen

Yes "800+" they also have to make 200+, or 1000+, haha.. 10,000 divided by 12 is "800+", 20,000 divided by 12 is the correct answer. We both know you won't admit to making a mistake cause this is obviously someone "nitpicking". ha..

Nima (not verified)    November 15, 2012 - 11:42PM

I think this article is really negative and disconnected from reality.
1. Your argument about orders not turning into sales is really dubious. Cancellation rate vs. new order rates have consistently shown that Tesla is making positive movement in this field, just a few months back it was 5000 reservations, now its 13000+. Sure there are a number of reservation holders that may or may not follow up with their orders, but there are also a staggering number of people who just want a shorter wait time before they put down their deposit (myself included in this crowd). And if the numbers are any indication so far, those to-be-reservation holders far outnumber those who cancel their order.
2. Tesla is not demand limited! It has never been. They are production limited, so while they put in allot of effort into their engineering and production they haven't even begun a true marketing blitz, why? Because they don’t need to, not yet anyway. Add to that the very fact that the car is just coming out and reviews are just starting to come in from major magazines (and with amazing success I might add), things like car of the year by Motor trend or the final review by consumer reports will simply add to the ammunition a marketing team could use when and if they even needed to reach for higher demand and new customers. Tesla got all of its reservations on next to no awards, and a puny marketing effort in comparison to any major automaker. Rest assured when needed Tesla could easily leverage a much higher number of customers than it currently has in a very very long line up.
3. Comparing model S to any existing EV as a benchmark is just non-sense. It is no indication what so ever as to what the sales of Tesla would be that Volt or Leaf’s sales suck. First because those cars are full of compromises in order to be electric. Secondly because they are marketed as EVs and so you make the same mistake as everyone else to lump every EV into a big pile called EVs. So far EVs have suffered low sales because as a total value package they are not competitive at all. The model S doesn’t even need to be sold on the idea of an EV car, in fact it is not the marketing strategy Tesla follows. It is being sold as a luxury sedan that happens to be electric. While Audi may move 10000 unit per year of A6, it’s not saying anything about the total number of luxury sedans being sold in the US by every single manufacturer, from BMW to Lexus, Acura, rolls Royce, Porsche, infinity, the list goes on. If Tesla simply took 10% of sales from each of these manufacturers 20'000 units per year would be completely achievable.
4. The most important thing you're missing is the total value proposition of a car. While the Model S is priced like a BMW or Audi, it has substantially lower operating costs, from electricity costs (less than $3 to fill it up) to maintenance and repairs. All and all when calculating monthly cost of ownership based on a 3% interest rate, amortized over 10 years (warranty period for battery) the $57'000 car is the equivalent of buying a $37'000 gas car. This equation means a whole new bracket of buyers that would never be considering a car in this price range can now finance their way to a much higher level car simply because they can afford a higher monthly payment as a result of not paying for gas and high maintenance costs. These are the people you have absolutely no way of accounting for, they buy Mazda’s or higher end Toyotas, and there is an enormous number of those customers.
But all of this said, you can speculate one way or another, and odds are like every other skeptic from the moment Tesla started, who questioned even the possibility of car like this, by a startup company while other big manufacturers couldn’t do it, you will be proven wrong. Time and again skeptics came wrote about how it couldn’t be done for this reason or that, used volt and leaf to make a point, and then no one ever heard of them again, cause they were wrong. This is no Leaf, this is no Volt. It’s amazing to me how easy it is for people to categorize a car as an EV or whatever else only to make a short sighted point without realizing the total equation that drives the purchase of a car, and this equation has only one component in the drive train technology.
I’m going to save this article and I’m going to come back to you in a year or so and email it to you with another response that doesn’t talk about how due to various speculative reasons you’re wrong, but it will just say, look! You were wrong! Needless to say there will be tons of smiley faces in that email.

Good luck with your predictions.

Aaron Turpen    November 16, 2012 - 5:14AM

In reply to by Nima (not verified)

Thanks for the long, but ultimately pointless response, Nima. I've spelled out the LUXURY SEDAN MARKET you say Tesla could take 10% of. That's about as realistic as saying that in its first year of production, Kia could have taken 10% of the small car market. Completely bogus.

Tesla is an unproven vehicle entering into a market where buyers are extremely brand loyal. Attempting to make a $57,000 (average purchase price is $75k, not $57k, btw) into a $37k car is ridiculous. Sure, on paper it might look that way, but it won't when the monthly payment comes due.

What you're doing in your reply here is attempting to evangelize the car and the company and paint me as some kind of "other" or "bad guy" in the same way that Democrats and Republicans make partisan opposition out of nothing. People can see what you're doing for what it is.

Back to reality, the car is brand new. Production is brand new. The company does not have a long or well-established history of either producing large numbers of vehicle or of producing quality on such a scale. So if they do somehow manage to produce and sell 20,000 cars next year, they will have done so by going beyond beating odds and working miracles. At that point, you will be free to worship them as you wish, Nima.

As for me, I'm placing my bets on the obvious. They may produce 20,000 Model S units by the skin of their teeth, but they will not be able to sell that many. In 2014? Sure, that's possible. But not next year.