April 11, 2016

Tesla to the rescue!

On March 31^st, Tesla unveiled its newest car, the Model 3, and started taking reservations for it. In the first 72 hours 276,000 cars were pre-ordered, a number that rose to 325,000 in the first week. To put these numbers in perspective, there were 665,000 electric vehicles on the road globally at the end of 2014, and 550,000 EVs were sold worldwide in 2015. This suggests a global stock of 1.2 million electric vehicles at the end of 2015. The first week’s pre-orders of the Model 3 would expand the global EV fleet by more than 25%!

This boost to the market could not come at a better time. In 2015, the EV market experienced a slowing in sales, as shown below. Lower gas prices may be one reason, as they make EVs less appealing financially. However, a lack of new EV models has also been cited as a potential reason for the slowing market.

 

There are likely several reasons for the excitement around the Model 3. It is a beautiful car, benefits from the halo effect of Tesla’s prior successes, and promises a premium product for the price of an average new car. Critically, the Model 3 is expected to have a range of 215 miles per charge, which can address the range anxiety issue for most daily commuters, since the majority of daily tours are less than 100 miles.

Backstopping this is Tesla’s growing charging station network. Right now there are 613 “supercharger” stations in United States with 3,628 Superchargers, and the network is expanding.

Will the benefits of Tesla’s new model and people’s enthusiasm for it accrue exclusively to Tesla, or spill over to boost the EV market more generally? Let’s use Google Trends to look through the search frequency of some electric vehicle related subjects before and after Tesla’s unveiling of the Model 3 to see how the unveiling has affected general interest in EVs.

The search frequency for “Tesla Motors”, experienced a spike on the time of unveiling, then declined but is still higher than before the unveiling. Going through searches related to “Tesla”, we can see that searches for “electric vehicle” and “charging station” increased sharply at when the new Tesla was unveiled. They have since declined, but they too are still higher than what they were before March 31^st.

Interestingly, if we look at the search frequency for “Nissan Leaf“, which is one of the more established, popular and affordable electric vehicles, we can see that its search frequency follows a similar trend. It is hard to imagine that this is a coincidence, especially because we can see the same pattern for “Chevrolet Bolt” and “BMW i3”. While we cannot yet conclude that the new Tesla will provide a sustained boost for the whole EV fleet, it does appear to have stimulated some broader interest in the EV market and charging infrastructure.