Recent times have not been kind to the electric vehicle (EV) industry. Sales growth has hit a plateau in the United States, while Chinese EV manufacturers, buoyed by subsidies, are ambitiously eyeing global market penetration. Moreover, the oft-lamented lack of charging infrastructure continues to be a roadblock. Amidst this gloom, Tesla (NASDAQ: TSLA) has been in the trenches, grappling with a slew of setbacks. However, a ray of optimism peeked through with the release of registration data for July, heralding a positive turn for its investors.
The Surge in EV Registrations
In what can be seen as a silver lining for the EV sector, new EV registrations jumped a notable 18% in July compared to the previous year. According to data from S&P Global Mobility, Tesla’s Cybertruck played a pivotal role in driving this uptick. Furthermore, the percentage of electric vehicles in the U.S. light-vehicle market climbed to 8.5% from the prior year’s 7.6%. Notably, the substantial 18% surge in July outpaced the overall January-to-July increase, where EV registrations grew by 8.7% year-over-year.
In the second quarter, Tesla witnessed a decline in sales for the second consecutive time. It marked the first instance in the company’s history that year-over-year sales had dipped for two consecutive quarters. While sales slid by 5% in Q2 and 8.5% in Q1, the surge in registrations in July indicates a promising start to the third quarter.
Tesla embraced a positive shift in July by breaking its five-month losing streak as registrations rose by a modest 1.2% year over year. A notable chunk of this growth came from the Cybertruck, with Tesla delivering 5,175 units while all other electric pickups combined for 5,546. This stat underscores Tesla’s unwavering dominance in the domestic EV market, a fact depicted vividly in the graph illustrating the top 10 brands by July registrations.
Graphic by author. Data source: S&P Global Mobility
(Registration data is utilized as an approximation for sales figures due to Tesla’s lack of monthly U.S. delivery breakdown.)
Unveiling the Downturn
Despite the promising 18% surge in July, a shadow looms over the EV market. Presently, EVs are not selling at their full manufacturer’s suggested retail prices; manufacturers are incentivizing buyers with substantial discounts to bring prices in line with conventional gasoline-powered vehicles.
“If the incentives were removed, sales would witness a colossal drop,” remarked Tom Libby, an analyst at S&P Global Mobility, as per Automotive News. Another specific pitfall for Tesla reveals that registrations for the Model 3 sedan plummeted by 31% in July. This downtrend has been consistent throughout the year following the exclusion of federal EV tax incentives for the base Model 3 starting January 1. This policy shift resulted from a new regulation barring cars with battery components sourced from countries considered “foreign entities of concern,” such as China, from availing federal tax credits.
The Interpretation
July marked a slightly brighter start to the third quarter for Tesla. Yet, amidst this glimmer of optimism, it is undeniable that the competitive landscape in the EV realm is expanding. The imminent influx of new rival vehicles onto the streets poses additional challenges for Tesla as its existing models age. Nevertheless, despite the hurdles, Tesla appears poised for resilience. The recent fluctuations in sales and registration data do not strike a significant blow to its investment narrative, providing investors with a modicum of reassurance.