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Tesla Model S / X sales crash against anticipated upgrade, end of full US tax credit, Model 3 cannibalization

Tesla’s Model S and Model X sales crashed by around 50% during the first quarter. One possible explanation is that buyers are waiting for an anticipated hardware upgrade and a possible design refresh. Other big reasons include the end of the full $7500 tax credit in the US and cannibalization (especially of the Model S) by the Model 3.

Last night, Tesla released its Q1 2019 numbers – confirming the production of 77,100 vehicles and the deliveries of 63,000 cars.

Amongst those 63,000 deliveries, only 12,100 were Model S and X vehicles and for the first time, Tesla didn’t even release the split between those models.

It represents a 56% decrease over the 27,550 units delivered during the previous quarter and 44% drop versus the same period last year.

That is a significant reduction in sales, but Tesla didn’t offer a clear explanation for it in its announcement.

Electrek’s Take

We were aware that Model 3 deliveries would be down this quarter due to the market introduction in Europe and China, but Model S and Model X numbers are a bigger surprise – and possibly a worrying sign for Tesla’s high margin product line.

Model 3 has been out for over a year now and there’s never been any strong evidence that it was cannibalizing sales of Model S or Model X. But here we are.

Personally, I think it might also have to do with buyers anticipating changes with those vehicle programs.

When Tesla announced Supercharger V3, we noted that it would negatively affect Model S and Model X sales since Tesla couldn’t confirm the charge rate for those vehicles.

Model 3 now has the fastest charging architecture by far. If I’m shopping for a high end sedan, a high end Model 3 is looking a lot more attractive, especially at lower price points than a Model S whose design is long in the tooth.

It hinted at a needed upcoming upgrade to take advantage of the capacity of those new charging stations. I believe many buyers are waiting for that upgrade.

Furthermore, we reported last year that Tesla is planning a Model S and Model X interior refresh and some buyers could be waiting for that too, but our sources at the time said that it was planned for around June or July 2019.

There’s also the end of the full US Federal Tax credit which means purchases of the high end vehicle might have been pushed to the end of 2018. Tesla did mess with pricing the whole quarter which at times more than made up for the prices.

We haven’t seen any direct evidence of it, but other EVs in the Tesla Model S/X class from Jaguar, Audi, Porsche and others may have also played a small role in the sales decline.

Either way, it is becoming clear that Model S and Model X demand has fallen drastically in the last few months and conversely, it could explain Tesla’s erratic price changes to try to attract new buyers.

Do you think those upcoming updates are going to bring back demand to the usual ~20,000 units per quarter or even push demand higher? Let us know in the comment section below.

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