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Tesla becoming a volume OEM in Europe – New third-home, Germany, now largest European market

Updated: Nov 12, 2021


Key points:

  • Tesla's W-European market share now at same level as Mazda/JLR in W-Europe

  • Market share during Q3 was just below 2% – or every 50th new car

  • Just under every fourth W-European new Tesla landed on German roads this year

  • 26,000 new Tesla vehicles registered in Germany during the opening three-quarters

  • Proportion of German Tesla models being exported after 6-months?

  • Tesla's first big market retention battle just around the corner


Schmidt Automotive Research logo

The 'new' incumbent? – The genie is out of the bottle and Tesla appears to be equipped with the vessel for the perfect storm

With a decade long European market presence, Tesla is about to start local production in Europe's automotive heartland, Germany.

As regulatory approval awaits, the Elon Musk-led company can finally count its new European hub as its largest European market, following a hesitant reception.

Back in 2013 whilst presenting the Model S at an event in Munich, CEO Musk hit

home how crucial the German market was: "if we can't do well in Germany, that's

not a good sign". Now eight years later first tangible signs are emerging that

Germany is finally starting to do "well".

"if we can't do well in Germany, that's not a good sign".

Elon Musk, Munich Germany, 2013

During the opening three quarters of this year, German Tesla registrations (25,970) surpassed the UK (22,020).

Just two years ago, Germany accounted for less than 10% of Tesla's European deliveries, while between January-September this year it was close to 1-in-4.

The American company, which once counted both Daimler and Toyota as shareholders whilst benefitting from a cut price Californian production site courtesy of GM/Toyota – which got things rolling one decade ago – has also been indirectly backed by various other OEMs, paying handsome sums to the now Texas-based company, in the form of regulatory credits – notably FCA in Europe in 2020 as well as Jaguar Land Rover (GBP37m planned) and Honda in Europe/UK this year – as reported. Combined with the non-published Chinese and US deals, credits contributed over $1.5 billion in revenue this year.

In the meantime, it has now broken through the 1 per cent market penetration level of the total W-European passenger car market (1.4% YTD and 1.9% in Q3), putting it on par with the likes of pool-partners JLR (1.5%), translating to just over every 50th new car in W-Europe in Q3. Model 3 was the No.1 model in Europe in September but with many anomalies It is then perhaps entirely appropriate as COP26 begins an electric car made it to the number one spot in the month of September according to JATO, albeit with several anomalies: Tesla's end of quarter push, (an almost entire quarter of deliveries in one month), the semiconductor shortage (traditional OEMs are redirecting chips to lower volume higher-margin models – Mercedes S-Class/EQS almost outnumbered C-Class deliveries in Germany in September) as well as several other market conditions favouring EV models (London's expansion of the low emission zone helping the Model 3 claim the top spot outright in the UK in September).

Tesla store Berlin Germany sign and front
Tesla store Berlin Germany

A UK fuel shortage likely helped Tesla's prospects further as EVs were seen darting past congested fuel stations. According to UK Autotrader data, the search for electric cars in their database reached a new record of 26.5% of all vehicle searches in the week (September 2021) of the fuel crisis.

German government fuelling Tesla's European expansion? Generous German purchase incentives are also having a large impact, with a number of marketing promotions spotted by this report identifying some independent dealers are even offering a 6-month trial of the Model 3 which they offer to repurchase for the full price (minus the government €6,000 incentive).

The German regulation states in order to receive the government purchase benefit the vehicle must remain in Germany for a minimum of 6-months. It is then possible for these vehicles to be exported to another country and very likely at close to the new German list price which would mean a neat €6,000 profit or there about.

Germany now Tesla's largest European market

It's not just current conditions that are favouring Tesla though. An important ingredient to their recipe is the hardware their vehicles are fitted with. On paper, the capability of some form of autonomous driving that can be monetised at a later date – with a relatively simple over the air update, assuming regulatory framework allows – leaves large locked-in potential. Conveniently for Tesla, its new European home offers some of the most open autonomous real-world test-fields on the continent. VW CEO Diess, who recently invited Musk to chat for an hour at a management meeting, said, “the real game-changer is software and autonomous driving.”

“the real game-changer is software and autonomous driving.”

VW CEO, Herbert Diess

Tesla is also likely to get more competitive in Europe once local production wipes out the current 10% import tax.

Headwinds? With hedging deals coming to an end, a potential Polexit (Grünheide facility located just 30 minutes from Polish border) to more competition. 2020 rang-in the first alarm bells, with other OEMs introducing BEVs to reduce their EU CO2 fleet targets thanks to sharpened regulation. This eliminated Tesla's BEV dominant market position overnight.

Tesla's first large retention battle on the horizon?

With Tesla's first real boom coming in Norway almost exactly four years ago with the Tesla luxury Model S/X recording 2,455 units in the closing month of 2017 according to OFV data, and just under 2,000 during the same month one year later, it will be crucial to see where these customers head to next with lease contracts coming to an end or private purchasers looking for a replacement.

With the Mercedes EQS coming to market during the final quarter of this year, all eyes will be on it to see if the first Tesla customers can be strung back from the new kid on the block to the German old guard. Dutch delight for old OEMs with new BEVs in December? Dutch volumes during the closing month of this year will also be key to watch given the over 2,000 Model X/S models that entered the roads of The Netherlands during the closing month of 2018 according to RAI data, in what has become a traditional boom month for Dutch BEV volumes due to the changes in company car taxation. With three-year leases coming to end in just two months time, traditional OEMs with new BEV products may be tempted to prioritise limited luxury volumes here, such as the EQS. A noteworthy 2,621 Jaguar I-Pace also enter the roads here in December 2018 which means those three premium models alone accounted for almost 80 per cent of the market in the same month.

It's the software, stupid From 2025 when updated EU CO2 targets enter, software will need to be on par with Tesla, especially as those leasing contracts come to an end.

Yet to bring some form of electrification to the market and then hit the snooze button is no longer enough. Even Toyota announced plans for their future BZ (bee-zee) vehicles from 2022 which means things are about to get bee zee...

The European Electric Car Flash Report which is published on a monthly basis covers the entire West European region in a detailed data-driven manner.


May also interest you: Future outlook: Semiconductor crisis accelerates the EV transition... BEVs are now expected to soak up 10.2% (1.132M units) of the total market while with PHEVs added to the equation – a route mostly exploited by premium OEMs click here for the story


*Western Europe 18 Markets: EU Member States prior to the 2004 enlargement plus EFTA markets Norway, Switzerland, Iceland, plus UK


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