Tesla Model Y Is Best Selling. There's a Lesson For Ford, GM.

Tesla
hit quite a milestone recently. The electric vehicle pioneer appears to have the best-selling car model of any kind in the world. An achievement like that actually doesn’t help investors all that much — it’s in the rearview mirror and the market looks down the road. Still, there’s a lesson in it for automotive investors.

“Model Y became the best-selling vehicle of any kind globally in Q1, surpassing the likes of Corolla and Golf,” said
Tesla
(ticker: TSLA) CEO Elon Musk on the company’s second quarter conference call. “This was, I think, an incredible achievement by the Tesla team, and just a huge thank you to our customers for their support.”

It takes a while for the auto industry to tally all its numbers. Not every auto maker reports model sales globally. Oftentimes, third-party organizations add up registration data from around the planet. On Tesla’s first quarter conference call, Musk said the Y was the best-selling vehicle in Europe and the best-selling non-pickup in the U.S. That was an easier claim to verify.

The best selling car in the world in 2022 was the Corolla from
Toyota Motor
(TM). Globally, consumers bought about 1.1 million units, according to auto data provider Focus2Move. The Model Y finished fourth.

Through May, the most recent data available, Model Y is in first with about 428,000 units, up more than 85% from the same time last year. Corolla is in second with about 411,000 units, down about 7% from last year.

Toyota didn’t immediately respond to a request for comment about first-half Corolla sales.

At the corporate level, Tesla reports Model Y and 3 sales together. In the first half of 2023, Tesla sold almost 860,000 Model Y and 3 units around the globe. First half U.S. data is available, Tesla has sold almost 201,000 Model Ys, and 113,000 Model 3 sedans.

That makes the Y the top-selling non-truck in the U.S. The top three spots are the
Ford Motor
(F) F-150, the Chevy Silverado, and the Dodge Ram pickup truck.

The different rankings around the globe don’t really matter. All the top-selling cars and trucks, including the Model Y, are bona fide hits. What any aspiring EV maker including
Ford
and
General Motors
(GM) need is a hit, something that sells hundreds of thousands of units instead of tens of thousands of units.

Ford was looking strong with the F-150 Lightning. But a battery defect and some plant upgrades knocked it off its growth trajectory.

F-150 Lightning sales peaked at about 2,400 units in October 2022. That annualized to roughly 30,000 units, or about 4% or 5% of total F-150 sales in the U.S. There needs to be more, which might be one reason Ford cut the price of the F-150 Lightning in July.

For GM, most of its EV models are coming. Electric versions of the Chevy Silverado and Chevy Blazer are coming in 2023. The electric version of the lower-priced Chevy Equinox comes in 2024. In the U.S., the Equinox is on track to sell roughly 200,000 units in 2023. The EV Equinox is a candidate for the EV hit it needs.

The Blazer will sell roughly 70,000 units.

The stakes for GM and Ford are high. Shares trade for roughly six times and eight times 2024 earnings estimates, respectively. Tesla trades for 55 times estimated 2024 earnings. No one expects the gaps to close completely, but a hit EV will help traditional automakers a lot.

Tesla stock is up about 111% so far this year. Ford and GM shares are up about 20% and 15%, respectively. The
S&P 500
and
Dow Jones Industrial Average
are up about 18% and 6%, respectively.

Write to Al Root at [email protected]

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