EU Market Situation and Outlook

[Yggdrasill]

Nope, but the price of oil has crashed and most of Norway's GDP and many people's income is directly or indirectly dependent on oil. How is that for a paradox? Oil gets cheaper, Tesla sales decrease because people who make money on oil can't buy Teslas?

You're close, but not quite right. The falling Tesla sales is not because people working in the oil industry have less income and can't afford Teslas. This factor is fairly irrelevant. What's happened is:

1. The price of oil dropped.
2. This means lower activity in the oil industry, as oil fields with a break even price of more than 50 USD/bbl are all shelved. (This is most of the oil fields discovered in recent years.)
3. To adjust for lower activity, oil-related companies start firing people. Already 25k people have lost their jobs, and it's been projected that maybe as many as 100-200k people will lose their jobs before this is over. This is a lot in Norway; we are only around 5 million people, and 330k people have jobs related to the oil. 100k lost jobs here is equivalent to a loss of 6.4 million jobs in the US, relative to the size of the population.
4. To increase activity in other parts of the economy, the government drops the interest rate. You can compare projections from october 2014 to current projections.
5. This means it's less attractive to keep money in NOK, so financial institutions and countries reduce their exposure to the NOK.
6. This means the NOK weakens against the USD and EUR. Since October 2014 the USD/NOK exchange rate has gone from 6.5 to 8.6.
7. This means that when Tesla keeps the pricing unchanged in USD, a 100k USD Model S goes from costing 650k NOK in October 2014 to 860k NOK today, or an increase of 32%.

The last point is not entirely true, though. Tesla has chosen to reduce the profit margin in Norway, to get higher sales, so while there has been a price hike, it's not quite 32% since October 2014. And one thing to remember is that in Norway, most Teslas have been sold to the middle class. TCO-wise, a Model S hasn't been that far away from a high end VW Passat. Even a slight increase in price is enough to push the Model S out of reach for the middle class. The 70D was a godsend in this regard - it's a very attractive car for Norway, we love AWD, and the range isn't that much worse than the S85. Without the 70D, things would have been much worse.

 

[mrdoubleb]

You're close, but not quite right. The falling Tesla sales is not because people working in the oil industry have less income and can't afford Teslas. This factor is fairly irrelevant. What's happened is:

1. The price of oil dropped.
2. This means lower activity in the oil industry, as oil fields with a break even price of more than 50 USD/bbl are all shelved. (This is most of the oil fields discovered in recent years.)
3. To adjust for lower activity, oil-related companies start firing people. Already 25k people have lost their jobs, and it's been projected that maybe as many as 100-200k people will lose their jobs before this is over. This is a lot in Norway; we are only around 5 million people, and 330k people have jobs related to the oil. 100k lost jobs here is equivalent to a loss of 6.4 million jobs in the US, relative to the size of the population.
4. To increase activity in other parts of the economy, the government drops the interest rate. You can compare projections from october 2014 to current projections.
5. This means it's less attractive to keep money in NOK, so financial institutions and countries reduce their exposure to the NOK.
6. This means the NOK weakens against the USD and EUR. Since October 2014 the USD/NOK exchange rate has gone from 6.5 to 8.6.
7. This means that when Tesla keeps the pricing unchanged in USD, a 100k USD Model S goes from costing 650k NOK in October 2014 to 860k NOK today, or an increase of 32%.

The last point is not entirely true, though. Tesla has chosen to reduce the profit margin in Norway, to get higher sales, so while there has been a price hike, it's not quite 32% since October 2014. And one thing to remember is that in Norway, most Teslas have been sold to the middle class. TCO-wise, a Model S hasn't been that far away from a high end VW Passat. Even a slight increase in price is enough to push the Model S out of reach for the middle class. The 70D was a godsend in this regard - it's a very attractive car for Norway, we love AWD, and the range isn't that much worse than the S85. Without the 70D, things would have been much worse.

I said "directly or indirectly dependent on oil". Yes, 25k people is quite a lot, but the indirect effect ripples through the economy in the fashion you detailed. Not disagreeing, I just kind of over simplified - but thanks for adding in details!

 

[Yggdrasill]

I said "directly or indirectly dependent on oil". Yes, 25k people is quite a lot, but the indirect effect ripples through the economy in the fashion you detailed. Not disagreeing, I just kind of over simplified - but thanks for adding in details!

The thing is, for almost everyone, income is pretty much the same as before, in NOK. Even those who have been fired have basically the same income as before, only from unemployment benefits instead (for up to 2 years). The income hasn't been affected measurably, the exchange rate has. But yes, your post wasn't far off the mark.

 

[bonaire]

You're close, but not quite right. The falling Tesla sales is not because people working in the oil industry have less income and can't afford Teslas. This factor is fairly irrelevant. What's happened is:

1. The price of oil dropped.
2. This means lower activity in the oil industry, as oil fields with a break even price of more than 50 USD/bbl are all shelved. (This is most of the oil fields discovered in recent years.)
3. To adjust for lower activity, oil-related companies start firing people. Already 25k people have lost their jobs, and it's been projected that maybe as many as 100-200k people will lose their jobs before this is over. This is a lot in Norway; we are only around 5 million people, and 330k people have jobs related to the oil. 100k lost jobs here is equivalent to a loss of 6.4 million jobs in the US, relative to the size of the population.
4. To increase activity in other parts of the economy, the government drops the interest rate. You can compare projections from october 2014 to current projections.
5. This means it's less attractive to keep money in NOK, so financial institutions and countries reduce their exposure to the NOK.
6. This means the NOK weakens against the USD and EUR. Since October 2014 the USD/NOK exchange rate has gone from 6.5 to 8.6.
7. This means that when Tesla keeps the pricing unchanged in USD, a 100k USD Model S goes from costing 650k NOK in October 2014 to 860k NOK today, or an increase of 32%.

The last point is not entirely true, though. Tesla has chosen to reduce the profit margin in Norway, to get higher sales, so while there has been a price hike, it's not quite 32% since October 2014. And one thing to remember is that in Norway, most Teslas have been sold to the middle class. TCO-wise, a Model S hasn't been that far away from a high end VW Passat. Even a slight increase in price is enough to push the Model S out of reach for the middle class. The 70D was a godsend in this regard - it's a very attractive car for Norway, we love AWD, and the range isn't that much worse than the S85. Without the 70D, things would have been much worse.

Well, why doesn't Tesla send in the CPO cars from the USA into Norway to sell as used? There is an incentive there to not tax used EV imports and would sell for less than new. Do you know the CPO profile in Norway that may describe the sales profiles of New versus Used (if any) and have Tesla stores listed many CPO from in-country trade-ins when the D models came out?

Oil is an energy source - and a source of wealth for some. But it is also a tax on the common man to live a daily, productive life. The higher the price of oil, the more wealth transfer from the population to the wealthy who mine (drill) and control oil distribution. The tax has been lowered and many common folks out there feel that they are relieved in the price drop. I am talking outside the heavy tax burden areas like Europe. Many USA consumers see cheap gas and think "party time" and their disposable income turns into new truck sales, more spending and well, more parties. The real solution is for people to squirrel (put away) away that money for later use when oil available slows down again and the per-barrel price ramps up again. Oil will run out some day and it will not be taken very well by the world consumers. This is the time to use oil to send engineers into battery labs and transmission companies to make better batteries and transmissions for cutting down the energy-use per mile of EVs even further so that the transition to EVs in later decades goes smoothly and has less cost.

Also - I am a big advocate of pulling out charging equipment from cars and going to a more commonplace DC FC solution. Today, the J-1772 solution offers an add-on cost for every EV built due to the AC-DC charge-inverter on every car. Take that out of cars and go fully networked DC-FC overall and you lower costs for every car. I believe Tesla may need to do that for Model 3 in order to cut individual car costs. Just sell a home DC EVSE (not FC but perhaps 40A) and charge at home on DC and on the road on DC (superchargers and CHAdeMO).

Think about the lower-paid workers. Farm hands. What do they do when costs go up (gas for example)? They car-pool in cheap used cars. The common worker hasn't gone to car-pooling just yet in the USA but I suspect the more car-pooling we start to see, the more oil is impacting everyone. The fact that everyone must drive their own car is one of our biggest problems - and a source of our greatest joys in the USA. The freedom we all want is also one of the worst things for the planet in terms of sustainability. Going from oil use in a single-driver car to electricity use in a single-driver car really is not a full solution to sustainability... But it is a start.

 

[Yggdrasill]

Well, why doesn't Tesla send in the CPO cars from the USA into Norway to sell as used? There is an incentive there to not tax used EV imports and would sell for less than new. Do you know the CPO profile in Norway that may describe the sales profiles of New versus Used (if any) and have Tesla stores listed many CPO from in-country trade-ins when the D models came out?

I'm not entirely sure what information you are looking for, but I have some comments:

- Sending CPO cars from the US to the EU isn't entirely unproblematic. For one thing, the charge port is different, and so is the charger. And the UMC. And the US versions have a different airbag setup. (No knee airbags in Europe.) I'm sure there are other differences that complicates things.
- I don't know what tax incentive for used EVs you're referring to. In Norway, new EVs have zero tax and used EVs have zero tax.
- There aren't very many CPOs being sold through Tesla. Currently there's one P85 on the site, and that's it. But I know they are continually selling demo cars as well as customer cars where the buyer backed out, before they end up on the site. There were hundreds of customer cars where the buyer backed out at the launch of the D. These were all sold months ago, before the CPO site was operational.

 

[jkirkebo]

Well, why doesn't Tesla send in the CPO cars from the USA into Norway to sell as used? There is an incentive there to not tax used EV imports and would sell for less than new. Do you know the CPO profile in Norway that may describe the sales profiles of New versus Used (if any) and have Tesla stores listed many CPO from in-country trade-ins when the D models came out?

US cars have the wrong charging port, no 3-phase chargers, wrong rear lights etc. It would be quite time-consuming to rebuild them to EU-spec.

 

[electracity]

.....

Also - I am a big advocate of pulling out charging equipment from cars and going to a more commonplace DC FC solution. Today, the J-1772 solution offers an add-on cost for every EV built due to the AC-DC charge-inverter on every car. Take that out of cars and go fully networked DC-FC overall and you lower costs for every car. I believe Tesla may need to do that for Model 3 in order to cut individual car costs. Just sell a home DC EVSE (not FC but perhaps 40A) and charge at home on DC and on the road on DC (superchargers and CHAdeMO).

.......

Doesn't work for destination charging or unplanned charging. Longer range EVs built this decade work in an environment of inadequate charging resources. Many Leaf owners today in the U.S. charge off 110v in their garage. These people don't even want/need to pay to instal 220v, much less DC.

 

[RobStark]

Many Leaf owners today in the U.S. charge off 110v in their garage. These people don't even want/need to pay to instal 220v, much less DC.

The current LEAF is an adequate solution for ~24k people per year in a market of ~4M new small and midsize sedans sold every year in the USA.

 

[abasile]

The current LEAF is an adequate solution for ~24k people per year in a market of ~4M new small and midsize sedans sold every year in the USA.

Today's shorter-range EVs do have their issues vis–à–vis public perception and cost, but in terms of utility, the LEAF can work quite well for a great many multi-car families, as can the Volt, i3, 500e, etc. Many, many owners of these cars, and even some Model S owners, do just fine charging at 120 V every night. One of the selling points of an EV is that electricity is everywhere. The real key to lowering costs is the battery packs.

Like others, I'm thinking the Model 3 may end up being relatively more successful in Europe than in North America due to Europe's higher fuel costs. Mid-range consumers are of course more price sensitive, and most people don't care enough about the environment to change their habits much. That seems to be evidenced by the fact that EVs still don't comprise more than ~25% of new car sales in Norway, even with the generous incentives there. What will it take to get the other 75% to start buying EVs? Or, in California, the other 90-95%?

 

[RobStark]

Today's shorter-range EVs do have their issues vis–à–vis public perception and cost, but in terms of utility, the LEAF can work quite well for a great many multi-car families, as can the Volt, i3, 500e, etc. Many, many owners of these cars, and even some Model S owners, do just fine charging at 120 V every night. One of the selling points of an EV is that electricity is everywhere. The real key to lowering costs is the battery packs.

The utility of short range EVs are irrelevant towards impact on the environment, health, a nations trade balance etc if people don't buy them.

Berating people to buy "utilitarian" short range EVs is an obvious failure even with generous incentives.

 

[abasile]

The utility of short range EVs are irrelevant towards impact on the environment, health, a nations trade balance etc if people don't buy them.

Up to this point, the cumulative contribution of all EVs, including Tesla vehicles, toward reducing pollution is hardly noticeable. But today's EV buyers, of all stripes, are helping to set a trend in the right direction.

Berating people to buy "utilitarian" short range EVs is an obvious failure even with generous incentives.

Agreed. So the question is, what will it take? Tesla's approach is making EVs "compelling" is clearly part of the solution. Is ~200 miles of range, plus the SuperCharger network, enough to dramatically expand the addressable market? I think so, but then again, I expected many more people to jump on board with the ~80 mile LEAF, at least until it become clear that first generation LEAF batteries weren't tolerating heat well. The Model 3 should be a very good test case. Hopefully it'll turn the tide toward mass adoption. In Europe, its smaller size should certainly help.

 

[RobStark]

In addition to Model 3 a great test case will also be LEAF at 84 ,107, ~130 and top trim 2018 model year ~210 mile range.

By 2018 we should also be able to see trends between styling Unique BEVs vs Conventional BEVs.

Personally I see a big jump at 150 mile,200, 300, and finally 400 being required for the late majority.

Since the economics of charging and specifically home charging practically prevent a charging station at every corner 30%-50% of the population will not feel comfortable getting rid of their last ice until 400 EPA mile range reaches consumers at the average price of a new car.

 

[Fanatic]

120 cars increase in Switzerland during October. Added data to wiki

 

[electracity]

120 cars increase in Switzerland during October. Added data to wiki

Any purchase incentives in Switzerland?

 

[Alfred]

Nothing comparable to Holland or Norway:
Some cantons offer a lower annual tax (called Verkehrsabgabe in Zurich). In Zurich e.g. purely electric vehicles pay no such annual Verkehrsabgabe at all. The amount of a "Verkehrsabgabe" varies with engine size, weight, CO2 emissions etc. A car with a 3000 ccm engine, 1800 Kg and no rebates for CO2 etc. would pay 488 Fr./year. Each canton is different.

So far there is no special charge on mileage that would match the high taxes on fuel. So to drive with electricity is a lot cheaper than gasoline or gasoil. Some insurance companies offer favorable rates for electric cars. One reason given was that electric car drivers are more careful than average.

 

[hobbes]

Very strange... Just found this: Google Übersetzer

Supposedly 2500 luxury electric cars were registered in Denmark before the tax increase in January 2016 according to Denmark´s tax minister, and they accuse Tesla of having done this to avoid taxation... Sounds like a cheap thriller. Danmark has had less then 1000 registrations so far this year, so this number sounds like it is out of proportion. And I cannot imagine anyone doing this would believe noone would notice! Also, would be totally untypical to build stock cars not specifically build for a customer. Maybe another company acting as a reseller? Wonder how this looks from a legal point of view - any Danish lawyers with a tax background around ?!

--- Update ---

Google Translate

Tesla says they order license plates in advance according to estimated sales... Wonder what this means for Q4 sales in DK!

Source of both links is the national Danish broadcasting corporation DR (broadcaster) - Wikipedia, the free encyclopedia

 

[mmd]

Very strange... Just found this: Google Übersetzer

Supposedly 2500 luxury electric cars were registered in Denmark before the tax increase in January 2016 according to Denmark´s tax minister, and they accuse Tesla of having done this to avoid taxation... Sounds like a cheap thriller. Danmark has had less then 1000 registrations so far this year, so this number sounds like it is out of proportion. And I cannot imagine anyone doing this would believe noone would notice! Also, would be totally untypical to build stock cars not specifically build for a customer. Maybe another company acting as a reseller? Wonder how this looks from a legal point of view - any Danish lawyers with a tax background around ?!

--- Update ---

Google Translate

Tesla says they order license plates in advance according to estimated sales... Wonder what this means for Q4 sales in DK!

Source of both links is the national Danish broadcasting corporation DR (broadcaster) - Wikipedia, the free encyclopedia

This could be big if true. As for Tesla building for inventory, it is not totally surprising. Tesla's inventory of finished goods has increased considerably in the last few quarters. The statement "Tesla says they order license plates in advance according to estimated sales" seems odd. Isn't the license plate issued for a specific car? Then, wouldn't that mean Tesla produced the car in expectation of a sale, and not after an actual order/sale?
And why should Tesla sell via resellers, if they have been fighting so hard everywhere to sell direct? Aren't there stores and service centers in Denmark?

 

[electracity]

Tesla would not pay for 2500 registrations without running it by a lawyer. That is also 5% of 2015 production. A big deal.
Does not seem likely to me.

 

[RobStark]

And why should Tesla sell via resellers,

The reseller the Danish minister is referring to is Tesla.

Tesla registers the car new under Tesla's name. That is the first sale. Then Tesla sells again to retail customer. Tesla becoming a "reseller."

 

[gigglehertz]

Bjorn Nyland did a video a month ago in which he talked about Danish sales being very high. There is a couple there who at the time had 58 referrals. I think the sales were legitimate buyers trying to beat the tax deadline.

Tesla referral program update October - YouTube