Tesla’s U.S. Model 3 Sales Drop 25% In Q4 – Peak Model 3 Came And Went

In Q4 of 2018, Tesla delivered approximately 61,650 Model 3 cars in America*. It remains a stunning achievement. That pace of Model 3 cars didn’t just surpass competitors' sales of the cars they built in that segment. Rather, Tesla’s Model 3 was outselling the entire brands’ total sales overall in America. In one amazing year, Tesla had gone from a promising company with sales averaging under 3,000 units per month of its top seller to over 25,000 units of its top seller in December 2018. What is interesting to us as Tesla watchers is that this level of Model 3 sales will likely never be surpassed in America.

Tesla Model 3 Sales Peak
Keep the Model 3 Sales peak in mind when consider the Tesla’s U.S. Model 3 sales drop. In Q4 of this year, Tesla again had its best quarter of U.S.-market Model 3 sales for the calendar year.

However, the sales at around 47,275* for Q4 2019 were down about 25% compared to Q4 of 2018. If Tesla had opted to, it might have been able to keep the growth going. However, Tesla says, and we believe, that the company opted to shift its sales focus, and much of its promotional focus as well, to other markets. Mostly in Europe. Instead of delivering all the zero-emissions vehicles it possibly could to its home market, Tesla loaded up scores of Model 3 cars and shipped them from California thousands of miles away. By fossil-fuel burning ships, considered by many to man’s most polluting creations.

New Tesla Factories
With new factories coming online to produce more Tesla vehicles, one might think that the Model 3 would be poised for another boom in America. Perhaps. Time will tell. However, our gut tells us Tesla has seen peak Model 3 in America. And the news is not all bad for Telsa by any means.

Tesla New Products
The first reason Tesla may not top its U.S. Q4 2018 Model 3 numbers again is the Model Y. The Model Y is the fifth Tesla Model and one that seems to hold the highest promise for sales volume. It is a crossover the size that is presently the top-selling type of vehicle in America to private owners (as opposed to trucks which include a big percentage of commercial and business-related sales). Like the Honda CR-V and Toyota RAV4, this crossover is “right-sized” for many buyers, particularly family buyers. The Model Y is poised to be the next big thing from Tesla. It is wading into a much broader market than the sports sedan market the Model 3 is in.

Another reason the Model 3 may not again beat its U.S. Q4 2018 delivery volume is the Cybertruck. As polarizing as this truck may seem, many Tesla Model 3 owners have already placed reservations on the truck and plan to trade their Model 3 in. This is a popular Tesla forum topic. That will push used Model 3 cars into the market. Which will somewhat dilute Model 3 new vehicle sales.

New Green Crossovers Coming
A final factor that may keep the Model 3 from returning to its high point in sales is a flood of other options for green crossover buyers, many of which will have up to $10K in federal tax deduction and state rebate incentives.

The Hybrid CR-V from Honda, Toyota RAV4 Prime (PHEV), Ford Escape hybrid and PHEV, and Mustang Mach-E crossover are all coming. The Mitsubishi Outlander PHEV is (technically) already here. GM may even have a crossover based on the Bolt to lure buyers' attention by the end of 2020. None of these green vehicle options existed in Q4 of 2018.

These and other upcoming new green cars will certainly benefit from Tesla’s U.S. Model 3 sales drop.

Related Story: Mustang Mach-E, Bolt EUV and Tesla Model Y Among 9 EVs Coming in 2020

If the Tesla Model 3 is ever going to beat its peak of U.S. sales in Q4, the time is actually right now. If it chose to, Tesla could make a push to provide as many Tesla Model 3 cars as America could gobble up in Q1 or Q2 of this year (2020). We see no evidence that is about to happen, but who knows?

Tesla's Model Y Will Soon Be The Big Seller
In many ways, the Tesla Model S was the vehicle that really woke the world up to the possibilities of an electric vehicle its owners didn’t secretly wish was better. The Model 3 was the volume player that expanded the market into a much lower price point with a much broader target audience. The Model Y can now do the same with an even larger audience.

In the end, much of Tesla’s Model 3 vs. Model Y sales volume will depend on how Tesla decides to allocate factory space. What a luxury to have! Our best guess is that the Model 3 has seen its peak of sales in America. And with Tesla bringing out its mainstream replacement and an eye-catching chaser model with a much higher price tag, it seems as if Tesla may not be shedding any tears about seeing the Model 3's U.S. sales peak having come and gone.

* Don't take our word for it regarding Tesla sales. We refer readers to Inside EVs for Tesla sales data which is the source we use. You can read Tesla's global delivery report here.

John Goreham is a life-long car nut and recovering engineer. John's focus areas are technology, safety, and green vehicles. In the 1990s, he was part of a team that built a solar-electric vehicle from scratch. His was the role of battery thermal control designer. For 20 years he applied his engineering and sales talents in the high tech world and published numerous articles in technical journals such as Chemical Processing Magazine. In 2008 he retired from that career and dedicated himself to chasing his dream of being an auto writer. In addition to Torque News, John's work has appeared in print in dozens of American newspapers and he provides reviews to many vehicle shopping sites. You can follow John on Twitter, and connect with him at Linkedin.