Just as Tesla Model 3 production began to hit a stride in the second half of 2018, helping the EV maker post a rare profitable quarter, signs have emerged that at least some versions of the Model 3 could be hitting a sales ceiling a year and a half after it entered production. Tesla produced 61,394 Model 3s in the fourth quarter of 2018, up 15 percent from the previous quarter, and another 25,161 Model S and X vehicles. The company also delivered 63,150 Model 3s in the fourth quarter, up 13 percent over the previous quarter. In total, the automaker delivered 245,240 vehicles in 2018.
Tesla also introduced a permanent $2,000 price cut for all models, largely in response to the expiration of the full $7,500 federal EV tax credit earlier in fall 2018. The expiration of this tax credit means that for the next six months, buyers of Tesla models will only be able to take advantage of a $3,750 tax credit before it is halved again in the second half of 2019.
"Starting today, we are reducing the price of Model S, Model X and Model 3 vehicles in the U.S. by $2,000," the automaker said in a statement. "Customers can apply to receive the $3,750 federal tax credit for new deliveries starting on Jan. 1, 2019, and may also be eligible for several state and local electric vehicle and utility incentives, which range up to $4,000. Combined with the reduced costs of maintenance and of charging a Tesla versus paying for gas at the pump -– which can result in up to $100 per month or more in savings –- this means our vehicles are even more affordable than similarly priced gasoline vehicles."
While this may seem like an insignificant issue against the backdrop of actual Model 3 prices, given the fact that Tesla has largely been churning out the priciest versions in the first year and a half of production, there are further signs that demand for those pricey versions is running out of steam. In essence, everyone who wanted a range-topping variant of the Model 3 has already received one. Tesla said that more than three-quarters of all new Model 3 orders in the last quarter of 2018 were from new customers, rather than those who had ordered in the first few weeks and were still waiting to receive their cars. The automaker has also made a serious dent in its backlog of orders and is now finally getting to the budget versions of the Model 3 when it comes to production.
This suggests that new customers have been waiting for the lower-priced versions to become available, rather than splurging on one of the higher-priced variants.
"There remain significant opportunities to continue to grow Model 3 sales by expanding to international markets, introducing lower-priced variants and offering leasing," Tesla said, as if preempting concerns about the long-term potential of the Model 3. "International deliveries in Europe and China will start in February 2019. Expansion of Model 3 sales to other markets, including with a right-hand-drive variant, will occur later in 2019."
That long-promised $35,000 Model 3 is still a few months away, due in Q2 of this year, and its delivery debut is expected to give Model 3 sales a further boost when it arrives. But when it comes to the higher-priced variants, it could be a different story.
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