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StockBeat: Norway Gives a Sobering Look Into Tesla's Future

Stock Markets Jan 05, 2021 05:59AM ET
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By Geoffrey Smith 

Investing.com -- What happens when Tesla (NASDAQ:TSLA) gets competition?

Those looking for the electric carmaker's unhinged market valuation to revert to something more rational have often pointed to the emergence of competitors as a potential trigger for a rerating.

However, Tesla’s considerable ‘first-mover’ advantage has kept such thinking hypothetical so far: even in China, the world’s biggest market for electric vehicles, it delivered more cars last year than Li Auto (NASDAQ:LI), Xpeng (NYSE:XPEV) and Nio (NYSE:NIO) – its three New York-listed Chinese rivals – put together.

But there are signs that its advantage is not going to last forever, especially outside of the U.S., where the personality cult of Elon Musk has less of a stranglehold on the public imagination.

Take Norway, for example. Its extremely high income levels and massive government subsidies have accelerated the adoption of the new technology. According to registration data released by the Norwegian Road Federation (OFV) on Tuesday, battery electric vehicles accounted for over 54% of all cars sold, while hybrids accounted for another 29%. In December, their combined market share rose to over 92%.

As such, Norway provides a rough idea of what a car market will look like when, if ever, the average consumer can afford an EV. 

But the average car buyer here does not appear to favor Tesla over any other brand that can produce a halfway decent alternative: the Model 3 was the company’s only representative in the top 20 car models sold last year, with 7,770 sales. coming in comfortably behind the Audi e-tron, with over 9,200. That bodes well for its parent Volkswagen (DE:VOWG_p), whose ID.3 model was the third-highest seller (the ID.4, which most analysts say represents a significant step up for VW's EV offerings, was launched too late in the year to have an impact). 

Before the fanboys get too worked up, this is not to say that any of the above are objectively better cars. But what it does reflect is that Tesla’s marketing does not have the same effect on everyone. Almost half of cars bought in Norway are bought by businesses (48.7% in 2020, according to the OFV), and across Europe, almost half of retail car sales are accounted for by women. Neither segment is as susceptible to the tech bro geekery that drives Tesla sales in the U.S., and it is hard to imagine that they ever will be.

Tesla can argue, with reason, that it will be more competitive in Europe when its Berlin plant starts up later this year. And there is no reason to think that it won’t sell all of its output easily enough, given the size of the market and the regulatory forces pushing faster adoption of EVs. And it's true that capacity bottlenecks forced Tesla to redirect cars to other markets last year (Norwegian sales picked up smartly in December when those bottlenecks eased).

But the Norwegian model suggests that Tesla is not going to steamroller competition the way that its valuation demands it must. And, given the faster rollout of electric models by established marques, Tesla will soon see the revenue it gets from selling emissions credits shrivel, exposing its weak operating profitability. 

(CORRECTION: The original version of this article incorrectly stated the full-year sales statistics. These have now been restated correctly.)

StockBeat: Norway Gives a Sobering Look Into Tesla's Future
 

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Comments (35)
James Theme
James Theme Jan 07, 2021 4:36AM ET
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Whatever brand tickles your pickle. They will sell the ones Norway doesn't want to China.
James Theme
James Theme Jan 07, 2021 4:36AM ET
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Different market other needs
Mick Krever
Mick Krever Jan 06, 2021 8:27PM ET
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Another price cut for Tesla in February - sorry for all the Tesla customers who are buying them now or before paid 1/3 more - really hope Tesla compensate them
Ihor Semchuk
Ihor Semchuk Jan 05, 2021 5:31PM ET
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Tesla will be at 790$ very soon
Ibraheem Salman
Ibraheem Salman Jan 05, 2021 4:31PM ET
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I really need help on how to hold a shares in TESLA
Man Up
Man Up Jan 05, 2021 10:57AM ET
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im glad there are still alot of ppl out therr who dont believe the future that tesla can bring. stock will go up as long as there are nonbelievers
Nam Soo Hoo
Nam Soo Hoo Jan 05, 2021 10:49AM ET
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market in China is much bigger and generally people has better perception on Tesla brand.
Mick Krever
Mick Krever Jan 05, 2021 10:49AM ET
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Why would you pay $30,000 - $50,000 for a $20,000 plastic looking Model Y or 3 get 30% less range than the new Nio 150KWH Battery's 1000KM range
Danny Colverson
Danny Colverson Jan 05, 2021 9:50AM ET
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We can look at a very small sample and come to incorrect conclusions so we can write a headline grabbing article but in reality there's a couple of very simple reasons why Tesla didn't sell the most cars in Norway in 2020. 1) Look at the total for the last 5 years. Everyone in Norway already has a Tesla! The numbers dont lie. Tesla is EASILY the highest selling EV brand in Norway. People buying Audi and Merc EVs in 2020, are brand loyalists that are very late to the EV party. People arn't exchanging Model S and Model 3s for Audis and Mercs. 2) People are waiting for Model Y.
Roger Miller
Roger Miller Jan 05, 2021 9:42AM ET
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I believe profitability is weak for any car maker and this is where first mover advantage may help. Tesla may be profits may be helped by selling credits where as the competition is helped by selling traditional fueled vehicles.
Walid Abba
Walid Abba Jan 05, 2021 8:35AM ET
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Oh no Tesla was outsold in Norway because most shipements to Europe stopped due to covid disruptions that most be the end of Musk and Tesla , what this article shows is how desperate Tesla shortsellers have become searching any glimpse of hope to prove their famous narrative "competition is coming"  it will be very interesting to see how the "competition is coming" narrative will play out once giga Berlin opens and once model Y will be in the market and other tesla models will be available for customers in the EU , a reminder that ev share market is still 3% worldwide , it is very normal that teslas share of the market will slowdown once ev becomes the norm but in the same times tesla's sold cars will boom too because of the dramatic rise in ev's share worldwide , at that time i'm sure competition would have finally arrived and tesla will go bankrupt but until then you can enjoy the competition narrative next year once giga Berlin opens i'm sure it will holds tight as you are
Frank Birli
Frank Birli Jan 05, 2021 8:05AM ET
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the beginning of the end of the Tesla hype
 
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