March auto sales, as reported by dealers to their manufacturers, trickled out today. GM got tangled up and delayed its numbers by several hours, sowing confusion and premature articles. But beneath the wondrous hype about how auto sales had finally exceeded expectations – after they’d been perfectly awful for five of the prior six months – was a doozie. And the media, which does nothing but fawn all over Tesla, refused to touch it.
Tesla makes great-looking, expensive cars. And it’s the absolute media darling, to the point where every single one of CEO Elon Musk’s multi-billion-dollar ideas, from his Gigafactory to the utterly silly Hyperloop, stimulates a bout of uncontrollable drooling. But a media blackout was draped over Tesla’s sales figures.
And that’s a good thing. Because they weren’t exactly as awe-inspiring as Musk’s endless hype.
Tesla sold only 1,600 of its objects of desire in March, according to Motor Intelligence. That was up a measly 3.1% from a year ago, and down from its peak of over 2000 in August. Even the biggest, most sluggish automakers showed more growth: GM’s sales rose 4.1%, Ford’s 3.3%, and Toyota’s 4.9%. The market overall sold 1.54 million vehicles in March, up 5.7% year over year; in the first quarter, it sold 3.74 million vehicles, up 1.4%. Tesla sold 4,700 cars in the first quarter, up 0.9%. Sales had stalled!
If Tesla can’t even grow as slowly as GM and Ford, how is it ever going to gain market share?
Speaking of which…. GM’s market share in the first quarter was 17.4%, Ford’s 15.5%. Those were the top two. In the luxury segment, even Jaguar, the beaten-down brand that Indian conglomerate Tata picked up from Ford, and whose cars are in the price category of Tesla’s S-1, outsold Tesla with 4,715 units in the first quarter, up 31.5% from a year ago. That’s how you gain market share. With a crummy sales increase of 0.9%, Telsa lost market share.
But Tesla doesn’t actually have much to lose, other than money. With sales of 4,700 vehicles in the first quarter, Tesla conquered 0.00126% of total auto sales of 3,743,742 units, or rounded 3.74 million. Without Tesla, total sales would have been 3,739,042 units, or rounded 3.74 million. Turns out, once total sales are rounded to the nearest ten-thousand, as is often the case when talking about the US market, Tesla’s sales disappear! They’re simply too puny to matter.
OK, it’s fantastic to have small inconsequential automakers with languishing sales that build a few great cars that cost a lot of money to satisfy a tiny niche market. We love that. Legendary names come to mind: Ferrari, Lamborghini, Rolls-Royce…. Oops, they all belong to big automakers.
But what are they worth? Tata shelled out $2.3 billion to buy Jaguar and Land Rover from Ford. Most of their models are priced in the same category as Tesla’s S-1. Combined, the two brands sold 17,794 vehicles in the first quarter, up 11.2%. Nearly four times Tesla’s sales and over 12 times the rate of growth. So should Tesla be worth a quarter of what Tata paid for Jaguar and Land Rover? Or, under more generous conditions, should it be worth the same?
Whatever the calculus will end up being down the road, so to speak, currently the market values our sales-challenged, money-losing, single-model hero at $26 billion. GM is profitable and sells 160 times more vehicles than Tesla in the US, and many times more than that on a global basis – it’s the second largest automaker in China where Tesla is just trying to learn the ropes. Yet the market values Tesla at over half of GM’s value! That’s the kind of zany miracle that hype and the separation of reality from stocks can accomplish. At least for a while.