Tesla struggles in Germany with Model S buyers

Mathieu Rosemain
Bloomberg News

Tesla Motors Inc. has built a cult following in the U.S. for its high-powered electric sports cars. In Europe’s biggest car market, consumers are proving harder to convince.

Just 958 of Tesla’s 81,800-euro ($92,000) Model S, its only vehicle, sold in Germany in the eight months through August, according to data from motor vehicle office KBA. That’s a fraction of the 5,149 deliveries for the comparatively expensive Mercedes-Benz S-Class sedan. German e-mobility pioneer BMW’s i3 electric city car also outsold the Model S by more than 30 percent.

Tesla’s competition is clear at this week’s International Motor Show in Frankfurt, where its upcoming Model X sport utility vehicle is notably absent. Audi presented its zero- emission E-tron Quattro concept SUV, Porsche promised an electric sports car within five years and BMW AG said more green “i” models are on the way. After individual successes in the Netherlands and Norway, Tesla and its celebrity chief executive officer, billionaire Elon Musk, must challenge all three German brands to cement its position in Europe as a whole.

“It’s not enough to be successful in Norway; you have to be successful in the big markets,” said Stefan Bratzel, director of the Center of Automotive Management at the University of Applied Sciences in Bergisch Gladbach, Germany. “If you make it in Germany, you can make it everywhere.”

Long-Term Goal

On Tuesday, Tesla’s booth was quiet compared to the pumping music and chattering crowds at the German carmakers’ pavilions. A few visitors circulated among three Model S cars in red, white and blue.

The U.S. automaker said the moves by its rivals will help it in the long run.

“For us to achieve our long-term goal, which is to get people driving electric vehicles, we need the cooperation of traditional carmakers,” said Ricardo Reyes, Tesla’s spokesman. “When you hear companies like Porsche or BMW make very public commitments to this, it’s a vindication of what we’re trying to do.”

Still, those efforts face challenges as German consumers tend to be slow to adopt new products and may be more willing to trust domestic brands. In addition to that, Tesla hasn’t filled the vacant position of European sales chief, Reyes said. The company also has no plans to expand its German network of fast battery-charging stations.

Small Niche

Tesla delivered about 7,100 vehicles in Europe and 11,700 in the U.S. in the first half of this year, according to estimates from market researcher IHS Automotive. The company doesn’t release regional sales figures. Its home state of California accounted for nearly half the U.S. total, according to the California New Car Dealers Association.

“This is a product and a kind of marketing that best fits the United States,” said Bernard Jullien, director at the Paris-based automotive think tank Gerpisa. “The niche is even smaller for Tesla on the continent.”

It may take years before Tesla gains a strong foothold in Europe, said Carlos Da Silva, an analyst for IHS. The Model X, which will start deliveries this fall, won’t change that, he said, because the SUV will still be too big and expensive to appeal to a broad range of customers. The Signature series, a limited-edition version that hundreds have reserved, starts at $132,000.

The real growth for Tesla may come with the Model 3, a smaller car that Musk has said will cost about $30,000 to $35,000, Da Silva said.

Norwegian Boom

Tesla said in August that its first-half European sales increased by more than 50 percent. Much of that boost comes from Norway, where generous subsidies and perks including free parking, charging and driving on bus lanes have almost tripled the number of electric passenger cars on the road since 2013 to some 50,000.

The Model S was the country’s second-best-selling electric car after Volkswagen AG’s e-Golf in the first half, with 2,674 deliveries, according to website EV Obsession.

The Norwegian boom may not last forever. The government has said it will gradually start cutting incentives in 2018. No other European country offers such generous bonuses.

To succeed across the region, Tesla will have to persuade more buyers like Jerome Benoit, the 32-year-old CEO of French manufacturer Delta Plus. Benoit traded in a BMW 3-Series for a Tesla S 85 in 2013, partly because the electric car gave him the feeling of being at the forefront of the auto industry, a position the German brands have traditionally claimed.

“I’m pretty sure my father wouldn’t have chosen it, as it’s so high-tech and different from the usual luxury sedans,” Benoit said.