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Tesla’s Model 3 Takes the European EV Market by Storm

The enormous popularity of the Model 3 in Europe could boost Tesla stock

With the electric vehicle (EV) revolution gaining traction as more and more auto giants are stepping into the EV market space, Tesla’s (NASDAQ:TSLA) Model 3 is emerging as one of the best-selling EVs, especially in European markets.

TSLA Is Betting Big on the Electric Car Revolution

Source: franz12 / Shutterstock.com

There has been a sweeping shift in the vehicle industry from internal combustion engines to electric-powered versions. A host of factors such as pollution issues, government subsidies, cost advantages, stricter fuel emission standards, technical superiority, and increasing adoption from both automakers and customers have made EVs popular.

Although electric cars make up a small portion of the global automobile market, TSLA has acquired a substantial market share of this niche segment. With its popular Model 3 sedan, Tesla has established itself as a leader in the EV segment.

Notably, global electric car sales dropped for the first time on record in July after China dialed back its EV subsidies. But  North American EV sales also took a hit. While sales of the Model 3 have not been too robust in the United States and China, TSLA is certainly gaining momentum in Europe.

Since the launch of the Model 3 in Europe early this year, rising deliveries have been boosting Tesla’s sales on the continent. The Model 3 is in a class of its own, with superior features, advanced technologies, and speed and safety advantages compared with other brands, making it a highly popular vehicle in several markets.

Model 3’s Popularity Skyrockets in Europe

Tesla’s Model 3 has become a hot-selling car in Netherlands, with its 2018 sales crossing 10,000 units. Undeniably, this figure is massive, and it seems to be an impressive feat for a model whose deliveries began in February 2019. Not many vehicles generate that many sales in Holland even in a year. Reportedly, the Model 3 was the third best-selling vehicle in the country in the January-August period, just behind Volkswagen’s (OTC:VLKAF) Polo and Ford’s (NYSE:F) Focus. Nevertheless, after  deliveries of the Model 3 jumped in September, it is currently the most popular vehicle in the country this year. Markedly, the Dutch have bought the most EV vehicles in the European market, only outperformed by Norway.

In the Norwegian market, Tesla’s Model 3 is the hottest-selling car by a large margin. With around 12,000 units sold in Norway so far this year, sales of the Model 3 have been more than double that of the Volkswagen Golf, which is in the second spot.

Notably, Netherlands and Norway have always been big markets for TSLA, even before the Model 3 hit the roads. But after the launch of the Model 3, Norway and Netherlands are the runaway leaders of the EV game in Europe. With the two countries leading the wave toward cleaner energy and greener roads, other European nations are following suit.

Other European countries like Austria, Belgium, Spain and Italy are also buying more cars from TSLA. While these countries have sold only a few hundred Tesla Model X and Model S cars per year over the past few years, following the advent of the Model 3, TSLA has benefited from a significant surge in deliveries in those nations. That underscores not just the growing electric revolution, especially in Europe, but it also reflects the immense popularity of TSLA cars, particularly the Model 3.

Tesla’s sales in the United Kingdom and Germany have also been soaring. TSLA is also dominating the Switzerland market after the launch of the Model 3.

It is yet to be seen whether the Model 3 will manage to maintain its amazing run in the European market. With the continent targeting sales of at least 1,000,000 EVs in 2020, we believe Tesla’s Model 3 sales should continue to soar there as fossil fuel vehicle sales decline.

Will Strong Model 3 Sales Help TSLA Offset Its Woes and Boost Tesla Stock?

While Tesla Model 3’s success is remarkable, TSLA is facing a number of challenges, including high costs, a stretched balance sheet and a cash flow crunch. All of these factors have hurt the performance of Tesla stock. Since China is the biggest EV market, the country’s economic slowdown is likely to weigh on the company’s prospects and on Tesla stock.

However, Europe is turning out to be a major market for Tesla. Increasing demand for the Model 3 in European markets is likely to offset the firm’s weakness in China. Reportedly, EV sales in the European market increased 34% in 2019, and the trend is likely to continue, boosting Tesla’s sales and providing a positive catalyst for Tesla stock. Tesla’s Model 3 production ramp up in China at the Gigafactory 3 plant, the launch of its Model Y crossover and the ramp in its credits from the Fiat Chrysler (NYSE:FCAU) deal are also likely to help TSLA achieve its profitability goals and boost Tesla stock.

In light of such factors, we believe that the Zacks Rank #3 (Hold) company — which carries a growth score of A — is likely to overcome its challenges and return to profitability in the medium to long term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Article printed from InvestorPlace Media, https://investorplace.com/2019/09/teslas-model-3-takes-the-european-ev-market-by-storm/.

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