General

Is the Tesla Model Y the best-selling vehicle in the world right now?

Tesla Model Y Sales

My answer is “maybe,” depending on how you measure sales and how sales from last year’s leaders have risen or fallen. Since the sales figures are 3 to 6 months behind, we won’t know for sure until next year, but I will present the evidence found and you can judge for yourself. The method I used is I looked up last year’s top selling vehicles and then researched those models to find out what I could do to estimate current sales. For the sake of this article, I define the third quarter of 2022 as now, not the literal sale on the Saturday afternoon that I write the article.

My history with the Tesla Model Y

I’ve been a Model Y fan since the first time I heard about the product. At first, I didn’t even know why everyone was so crazy about crossovers, so I researched that and wrote this article. Basically, people like crossovers because they sit a little higher (allowing people to see the road better and older drivers to get out of the car more easily), they have a lot more luggage space than a sedan and generally have a little more ground clearance and four-wheel drive, so you can drive very lightly off-road. For these additional features, the cost is slightly higher, fuel economy is slightly lower, but they still drive (and park) more like a car than a large SUV or truck. It is a winning combination and is gaining popularity all over the world.

When unveiling Model Y, Tesla really downplayed how great the product would be to not hurt Model 3 sales, but I could see right away that while most were disappointed that it was just a bigger Model 3, it would be a huge hit. – because the Model 3 didn’t need a radical redesign, it just had to be a little bigger to hold more stuff and a third row to hold more people. This post I wrote after the unveiling explained that I thought the Model Y could compete with 8 different Toyota models (4 Toyota models and 4 Lexus models). I also noted how that saves Tesla huge development costs.

My family owns two Model Y crossovers and I’d love to persuade my other daughter to buy a third one, but we’ll see if that happens. My only complaint is that I wish my Model Y had a track mode so I could drift it more easily (I seem to remember Elon promising this would come with an acceleration boost, but I haven’t commented on this in a while heard).

Top sellers for 2021 and Q1 2022

To find this, I searched for reliable sources of global data for 2021. I decided to use Felipe Munoz’s analysis of 106 global markets.

Top 11 best-selling vehicles in the world in 2021, by Felipe Munoz. Source: https://fiatgroupworld.com/2022/06/13/the-tesla-model-3-hits-global-top-10-best-selling-cars-in-2021-full-ranking/

From here I knew that the biggest contenders were the Toyota RAV4 and the Toyota Corolla. It’s possible that one of the lower-ranked models (other than the Tesla Model Y) rose to overtake those two leaders, but I thought that unlikely in this environment. It takes about 2 months to put together the global sales figures, so the second quarter figures won’t be available until around September 1, so the most recent global figures I could find were from Focus2Move for the first quarter of 2022. quarter of 2022 sales of the Toyota RAV4 were 215,000 and the Toyota Corolla were 275,000.

Estimated Second and Third Quarter Global Sales for the Toyota RAV4 and Corolla

To estimate Toyota’s sales for the second and third quarters, I have used all production operations on the Toyota website for the last 9 months. The image I got from reading the announcements is that Toyota would like to build more cars than it can. I assume both Toyota and Tesla sell every car they make. Reading those reports, I estimate that Q2 revenue will be 2% lower than Q1 and Q3 will be 4% lower than Q1. This is not due to a lack of demand, but to production problems, mainly due to chip shortages, which are mostly due to Covid. So my estimate for the third quarter is that Toyota will sell 206,400 RAV4 crossovers and 264,000 Corolla sedans. In addition, Toyota is refreshing the Corolla before 2023, which should increase demand slightly but could cause production delays. Demand isn’t really the issue, but production delays would hurt sales as inventories are very low (at least for Toyota’s business model).

How can Tesla increase global production so dramatically when others can even match last year’s production?

Tesla is making huge investments to massively increase production. Toyota just seems to be trying to return to its record production from previous years. It seems to be constantly complaining about Covid-19 hitting its suppliers (as it has affected all automakers to varying degrees over the past 2+ years). As Elon has often said, including in the Q2 conference call, Tesla has 3 advantages over other manufacturers when dealing with supply change issues.

  1. For chip problems, Tesla has more and better software engineers and they have the ability to quickly rewrite software drivers that will allow them to replace one chip with another if the availability of the original chip becomes a serious problem. Tesla also uses fewer, more complex chips and runs many processes on them. In the current chip crisis, the modern chips were less of a problem than the older designs that many others use.
  2. Tesla is more vertically integrated than most, giving the company more control. It can shift resources to some extent to optimize production.
  3. Tesla has been planning to increase production by 70% or more per year for years – for years to come. Tesla’s stated target is 50%, but the internal target is clearly much higher. Because of this and the fact that Tesla has never canceled supplier orders (to my knowledge) during the Covid delays in the past 2 years, and because of Tesla’s superior financial strength and reputation, suppliers will likely favor Tesla over others. Assuming Tesla orders 90% more chips for 2022 than 2021 and suppliers give the company only 70% more, and because of Covid shutdowns, Tesla can only build 50% more vehicles (as it seems likely), Tesla would likely pay the extra chips (the company will need them soon).

Troy Teslike’s Model Y estimates for the third and fourth quarters

I put this table together from Troy’s recent tweet (I’m subscribed to his Patreon, so I had these numbers a few days before, but I can’t share them until he posts them on Twitter).

Conclusion

The last thing to look at is the average selling price. For simplicity, I’m just going to use the US base price. Although I realize that the ASP contains options and prices that vary around the world.

  • 206,400 RAV4 times $26,975 is revenue of $5.6 billion in the third quarter.
  • 264,000 Corolla times $20,425 equals $5.4 billion in third quarter revenue.
  • 224,344 Model Y times $65,990 equals $14.8 billion in third quarter revenue.

As you can see from my research above, Tesla is probably the best-selling SUV in the world in the third quarter and the best-selling vehicle of any type in the fourth quarter of this year. In terms of revenue, Tesla is already generating about 3 times the dollar sales of these top sellers and that lead will continue to grow as Tesla aims to roughly double Model Y production from current levels in the next two years!

Disclosure: I am a Tesla shareholder [TSLA]BYD [BYDDY]Nioz [NIO]XPeng [XPEV]and Hertz [HTZ]. But I am not giving investment advice of any kind here.


 

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