Tesla Could Be On Fast Track, J.D. Power Says



Super Charging stations like this one are a big advantage Tesla Motors has over other EV makers, J.D. Power says.Getty

Tesla Motors has drawn skepticism recently in the press as traditional manufacturers put more and more electric vehicles into the market, but a new J.D. Power analysis says not only has Tesla achieved remarkable success with its previous portfolio of vehicles, but it also is “well-positioned to exploit a significant sales opportunity with its new products and price points.”

One giant opportunity J.D. Power sees for Tesla is less expensive mass-market EVs, a market it is only just beginning to exploit. As the Southern California-based research firm noted, Tesla sold an estimated 160,000 vehicles to U.S. buyers in 2018 with a sales pace approaching 250,000 annual sales in the fourth quarter. Importantly, the analysis added, the pioneer EV-maker achieved this volume despite average prices estimated at more than $90,000 for the Model S and Model X, and more than $60,000 for the Model 3. While Tesla’s share of the overall light-vehicle market in the fourth quarter of 2018 was less than 2%, its market share among vehicles costing over $50,000 was significantly larger at just under 14%.

“Reaching almost 14% market share for the price points at which it competes is a remarkable achievement for Tesla, especially given the fact that many new vehicle shoppers will not consider a pure electric vehicle due to concerns about driving range and charging infrastructure,” the study said.

Tesla Model 3 has moved the brand into lower-priced segments with more consumers.Getty

Tesla recently launched a variant of its Model 3 priced at $35,000 and has just shown the Model Y hatchback/sport-utility vehicle, so it is poised to tap into a much larger market, and J.D. Power thinks it will do well.

We asked the spokesperson for the study, Tyson Jominy, managing director of the Power Information Network (PIN) at J.D. Power, to tell us more.

Forbes.com:  Why does J.D. Power think Tesla is poised for a sales surge?

Jominy:  The size of the segments and price points that Tesla is entering is five time larger than the spaces they had been playing in. Even if Tesla captures only a fraction of the share levels in the new segments and price points, volume stands to grow significantly.

Forbes.com:  It appears the number of consumers willing to consider an EV has grown sharply recently. Why?

Jominy:  The attributes of Tesla are such that they have highly desirable models and a cool factor—and they just happen to be electric. The range is such that anxiety is quite low and the supercharger network further alleviates that concern. If you can get a sexy product that isn’t the same as your previous three vehicles, why wouldn’t you?

Forbes.com:  It seems lower prices are a factor in the projected sales surge. Can Tesla profitably sell the Model 3 and successor models at the low ($35K) price point?

Jominy:  That’s the billion-dollar question and not one that anyone outside of Tesla can really answer. The volume will be there, but can they do it profitably? That remains to be seen.

Forbes.com:  How does the fact that Teslas are no longer tax-credit-eligible affect the overall equation?

Jominy:  The expiring tax credit was certainly a factor in pulling sales into 2018, but Tesla has responded with price and content changes in 2019 that obscure visibility into how the loss is truly affecting the value equation. Going forward, we see Tesla starting to get into leasing, which is a significant factor in the Model 3’s segment where more than half of all vehicles are leased each year. A lower monthly payment will again make any price increase less visible to consumers.

Forbes.com:  Are Tesla competitors just as likely to benefit from the new environment and greater acceptance of EVs?

Jominy:  We have seen numerous other examples when new product in a segment lifts all entrants. Certainly, as consumers start to learn that an EV can work for their lifestyle, it will be a boon to everyone selling EVs. That doesn’t necessarily mean others will be able to capture the cool factor, but they could make their value apparent to consumers.



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