Tesla's European Model 3 Sales To Decline By 60% In January Base

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Tesla's European Model 3 Sales To Decline By 60% In January Based On Registration Data

Jan. 24, 2020 4:21 PM ET 165 comments

Summary

January is almost over, and we can now easily extrapolate where Norway, Spain and The Netherlands will land with electric vehicle sales numbers.

For the Tesla Model 3, it looks like a 99.67% sales decline in The Netherlands, and 88% declines in Norway and Spain, compared to December.

Even if the rest of Europe somehow managed to stay flat, those three-country declines alone would sink Tesla’s European Model 3 sales number by 60%.

If instead we compare January 2020 to October 2019, those three countries are tracking “only” to a 52% decline.

Whether 52% or 60%, the point is this: Tesla’s European Model 3 business is off to an awful start in January, especially for a company that’s valued like a hyper-growth one.

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NOTE: A version of this article was first published on or about Jan. 24, 2019, on my Seeking Alpha Marketplace site.

On Jan. 2, 2020, with December month sales numbers fresh in hand, I published an article called Tesla (NASDAQ:TSLA): Ahead Of A Reduction In The EV Tax Incentive In The Netherlands, Record Sales.

The article dealt with the extreme jamming-in of Model 3 sales in The Netherlands in December, ahead of a change in the tax law in The Netherlands, and I predicted that sales in January 2020 would collapse as a result.

Specifically, I wrote:

For that reason, it should be clear that we will see the following changes in January 2020 in The Netherlands:

A dramatic reduction in Tesla (NASDAQ:TSLA) sales. How big of a reduction? I estimate more than 90%.

A 90% reduction in sales would have been bad. Now, with The Netherlands reporting daily vehicle registration numbers, and we have those numbers for the first 23 days of January, we can easily extrapolate what the January full month will look like, with very little room for error.

So, will Tesla’s Model 3 sales in The Netherlands decline by at least 90%, as I wrote only three weeks ago, on Jan. 2? Let’s take a look at the numbers:

Tesla Model 3 sales	Tesla Model 3	% of Europe
Europe December 2019	22,137
Netherlands December 2019	12,053	54%
Netherlands January 2020 MTD	33
Netherlands January 2020 (EST)	40
Netherlands decline Dec-Jan	-99.67%

Data sources:

-- Daily 3-country registration data: EV registration statistics for The Netherlands, Norway and Spain

-- Pan-European registration data here: Europe December 2019

As you can see in the table above, The Netherlands constituted a whopping 54% of Tesla’s pan-European Model 3 sales in the month of December. So far in January, Tesla has sold only 33 Model 3 units in The Netherlands, and if we simply extrapolate that out to 40 being delivered for the full month of January, the decline isn’t “at least 90%” as I predicted on Jan. 2. Rather, it’s a whopping 99.67%. It’s a statistical wipe-out. 12,053 in December was hero, an estimated 40 units in January rounds to zero.

All other things equal, the decline in The Netherlands alone would therefore wipe out 54% of Tesla’s European Model 3 sales, going from December to January. However, what about the other 46% of Europe which bought the Model 3 in December? What’s likely to happen with "that" 46%?

As it turns out, only two other countries in Europe report daily car registrations - Norway and Spain. The good news there is that, historically, Norway has been Tesla’s No. 1 market in Europe, so that's very much relevant. Norway wasn’t the No. 1 European country for Tesla in December, however - that title went to The Netherlands, which was the initial reason and focus for this article to begin with - and for which we also have daily registration data.

So, let’s take a look at Norway, with a similar analysis:

Tesla Model 3 sales	Tesla Model 3	% of Europe
Europe December 2019	22,137
Norway December 2019	1,251	6%
Norway January 2020 MTD	124
Norway January 2020 (EST)	150
Norway decline Dec-Jan	-88.01%

Data sources: Same links as for The Netherlands above.

The good news for Tesla is that an 88% projected decline for January (over December) is better than a 99.67% decline (as with The Netherlands). The bad news is that if your business shrinks by 88%, that’s still not good.

Now, I get it - and to pre empt any objections - I know perfectly well, duh!, what a partial explanation is for this decline: Tesla’s quarters are typically back-end loaded, with the first month or two constituting a far smaller share than the third and final month of the quarter. Still, for an alleged “hyper-growth” company such as Tesla - which by the way reported a 8% year-over-year decline in overall global revenue in its most recently reported quarter, Q3 2019 - the tolerances for sequential revenue declines still ought to be smaller than more mature, seasonal, revenue fluctuation stock stories.

In that context, an 88% decline in Tesla’s business from December to January is still a big hole out from which Tesla would hope to dig itself by the end of March. We will obviously have updates on this as the quarter progresses beyond January.

The third country for which we have daily registration data is Spain:

Tesla Model 3 sales	Tesla Model 3	% of Europe
Europe December 2019	22,137
Spain December 2019	164	1%
Spain January 2020 MTD	16
Spain January 2020 (EST)	20
Spain decline Dec-Jan	-87.80%

Data sources: Same links as for The Netherlands above.

Spain is of course of little overall importance in Europe, given that it was only 1% of Tesla’s Model 3 sales in December. Norway was 6% and The Netherlands was 54%, of the European Model 3 totals.

Still, the growth trend in Spain is important for two reasons:

We simply need more country data points. There's some correlation between sales in European countries. Therefore, even if only small countries, we want to see the trends in them.
Unlike The Netherlands, Spain did not have a major subsidy change on Jan. 1. So, the data is “undisturbed.” Unlike Norway, Spain also is part of the European Union, just in case that may have been an important factor.

The January decline for the Tesla Model 3 in Spain looks to become 87.8% in January, or extremely similar to the estimated 88% in Norway. In fact, those two numbers are almost scary similar. Will that mean similar declines for countries such as Italy, Belgium, Switzerland and Austria? We will find out in early February (as those countries only report full-month results, in the few days following the end of the month).

Adding up the declines from those three countries alone, in order to view Tesla’s reduction in European Model 3 business from December 2019 to January 2020, we get these results:

Tesla Model 3 sales	Tesla Model 3	% decline
Europe December 2019	22,137
Subtract Netherlands decline	12,013	54%
Subtract Norway decline	1,101	5%
Subtract Spain decline	144	1%
Europe net of 3-country decline	8,879	60%

As you can see in the table above, where the numbers are simply derived from the declines in the country-specific tables earlier in this article, we get an estimated 60% decline in Tesla’s European Model 3 unit sales for January 2020, when compared to December 2019. That’s probably a best-case scenario for Tesla, as I have assigned zero declines for any of the other numerous other European countries. Given that both Norway and Spain are on track for 88% declines in January - it seems reasonable that other European countries may have declined in January too, even if not by that much. Again, we will find out in early February.

What about comparing January with October?

Critics will say that for the sake of completeness, I also should compare January 2020 Tesla Model 3 sales with the October numbers for those three countries. That way, we are comparing first-month-of-quarter sales on an apples-to-apples basis.

Funny you should ask! In this table below, I make just January-to-October comparison:

Tesla Model 3 sales	January 2020 (EST)	Oct 2019	change
Netherlands	40	290	-86%
Norway	150	121	24%
Spain	20	26	-23%
TOTAL	210	437	-52%

Data source: EV registration statistics for The Netherlands, Norway and Spain

Here, in that January-to-October comparison, the reduction in sales is less. It looks like the “first-month-of-quarter to first-month-of-quarter” decline in sales from those three key European countries points to a 52% decline in Model 3 unit sales, not 60% as the December-to-January likely best-case scenario indicates. A 52% sales drop is better than 60% though, for anyone who thinks the difference between 52% and 60% is important in this context.

But is a 52% sales drop a good trend for Tesla, when it comes to the Model 3, in what is projected to be the highest-growth region for electric cars overall in 2020? I have written before, that the Tesla story entered into a fact-free territory in late 2019, and it does look like investors are completely overlooking what was an easily predictable European sales cliff that is taking place right under their feet, right now, in January 2020.

60% decline from December, or 52% decline from October? Either way, with January 2020 almost over, the evidence is mostly in: Tesla’s European Model 3 business collapsed in January.

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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.