Californians sour on Tesla Model S and Model X

In their most important market, the drop in records far exceeded the already fantastic global downturn. Something that opens a whole new question.

Model S and Model X are Tesla's high margin vehicles on high dollars. Some versions clock in for over $ 100,000. Sales of them have declined globally since Model 3 appeared in quantity. But in the second quarter, registrations in California by Model X dropped 40% compared to a year ago. And the Model S registrations dropped by 54%, to only 1,205 cars.

California is the most important market for these models. In 2018, the state accounted for 40% of Model S registrations in the United States. It is Tesla's home garden. In California, Tesla lashing has been deafening for many years, backed by fierce state subsidies from day one.

This registration data was collected by Dominion Cross-Sell, quoted by the Wall Street Journal. A delivery takes place when the customer takes possession of the car. A registration takes place later, when the sale of the vehicle is registered with DMV, and DMV completes the process.

Global Model S and Model X deliveries have deteriorated ̵[ads1]1; but not like California. Tesla, which will report its second-quarter revenue on Wednesday, does not provide US deliveries. It only reveals global deliveries. According to Tesla's own disclosures, global deliveries of Model S and Model X totaled 33% in the first half, with a fall of 44% in the first quarter and a fall of 21% in the second quarter. This type of fall – 33% in the first half – is devastating enough for any automaker, unless it plans to shut down the model in the years to come.

But the fact that car buyers in California make use of Model S, witnessed with a 54% drop in registrations, is rough. According to appearance, dollar and model X sales are brutally cannibalized by lower dollar sales 3.

Model 3 registration in California nearly doubled to 16,372 in the quarter, according to Dominion Cross-Sell. It will definitely be popular. In San Francisco I now see them running and parked every time I walk around. And they are involved in accidents. Just on Sunday, an allegedly fast-paced driver in a (peer-to-peer) rented model 3 ran red light in the tenderloin, collided with a Mini and then hit pedestrians. The heading of SFGate: "Man killed, wife injured after being hit by Tesla in SF." If the car had been a Ford Fusion, the vehicle brand would not have entered it in the headline.

Tesla is special. That's something that CEO Elon Musk has achieved. Something terrible tragedy involving a Tesla has "Tesla" in the headline. If any terrible tragedy involves a Ford, well, forget "Ford." Any advertising is good advertising, they say.

But high-dollar and high-margin Model S and Model X are like in 2017.

Model S has some issues, including it's expensive, it's no longer unique – there are many EV's out there – and it has been around since 2012. Although there have been many updates over the years, including mechanical and software updates, battery enhancements, and some exterior changes, the car is basically unchanged and is starting to get a bit long on the car, by car industry standards. It used to twist heads. Now people are used to it.

But the biggest problem Model S faces is Model 3. It looks similar – like a slightly less new braided Model S – but under the new price levels, Model 3 costs much less. And this gap is growing. Last week, Tesla raised the Model S base to around $ 80,000. This is over twice as much as the base model 3. And the most expensive Model 3 sells for around $ 15,000 less than the base model S. So for buyers, this is huge difference.

But for Tesla, the volume of lower priced lower-margin cars by loosing the volume of high-dollar high-margin vehicles is a difficult cash flow strategy that needs all the help it can get.

And with deliveries that plunge 33% globally, and more in its main market, which can be a confusing one for global trends, is now a new question: How long can Tesla sustain Model S and Model X? If Tesla cannot stop this fall in deliveries, after a year or two, the Model S and Model X will fall into oblivion and must be wound up.

Kudos to the private equity company behind this agreement. These things don't happen overnight for companies. They only happen overnight for investors. Read … Everything goes well until suddenly it is not: How a "Leveraged Loan" is blown

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