Tesla's Tanking U.S. Sales And The World Of Automakers Falsifying Sales Numbers

Steve Lynch
by Steve Lynch
tesla s tanking u s sales and the world of automakers falsifying sales numbers

Tesla’s first fleet deal? Around 100 Model S’s were sold to a Las Vegas startup taxi service.

The auto journo world is in a tizzy because electric automaker Tesla refuses to post its car sales numbers on a monthly basis and the numbers they do divulge are suspicious as they are without detail and they vary widely from actual registration numbers. Our friends at Jalopnik ranted about it last week, calling on Tesla to start reporting sales consistently. They based their story on a report by Seeking Alpha that deduced that Tesla may have as many as 12,000 unsold Model S’s, based on registration figures and the automaker’s quarterly financial reports.

We say congratulations, Elon Musk, you truly are the head of an American car company now, as reporting bogus sales numbers to the press is a normal part of an automaker’s modus operandi. Auto manufacturers claiming they sold more cars than they actually did is nothing new. Sales numbers in the US are based on those deliveries reported by dealers, not when the automakers wholesale the vehicles to the retailers as some believe. Carmaker execs at times may be motivated to look good to their bosses or shareholders or to outsell a rival. They will then pressure, coerce and bribe dealers with one-time cash incentives to have them report bogus sales at month or year-end, often to the dealer themselves as loaner or demonstrator cars. The vehicles are never driven and then sold as new, ideally as quickly as possible as their warranty clocks are ticking. Dealers who do not comply are thus put in an unfavorable price disadvantage with competing same-brand stores.

The Japanese automakers pioneered this practice during the high-demand, low supply days. At American Honda from the 1970s to the early 1990s, dealers reported every unsold car as sold at the end of each month or they risked losing precious future allocations. Those were the days when every Honda dealership employee “bought” a dozen cars a year and then the dealer would turn to the white pages of the phone book to find more “buyers.” It is not an urban car legend that a California Honda dealer once sold Accords to customers named “Mickey Mouse” and “Donald Duck.”

In December 2012 BMW North America, in their zeal to beat Mercedes-Benz in the US, reported 37,399 vehicles sold, an amazing 69% higher than their 2012 average monthly sales rate, thus claiming the US luxury brand crown. That December the industry rose 21% over the 2012 average due to it being the heaviest incentive month of the year and this no doubt contributed to the rise in Bimmer sales. However, BMW dealers that I spoke with in January 2013 complained that half of their inventory had been reported as sold in December. BMW got tons of pub for beating Benz but few noticed that when actual registration numbers came out a few months later it was revealed that Mercedes-Benz outsold BMW for 2012. Incredibly, in one of the few occasions where the media sniffed out this practice, the Wall Street Journal had reported about BMW’s shady sales numbers just months before.

It was one thing to report cars sold as loaners or demonstrators under the direction of the factory; it is another to do report ghost sales when your dealership needs the incentive cash to stay afloat. We covered the story of a South Carolina Suzuki dealer who was convicted of fraud earlier this year for doing just that. It probably did not help his case that he was also convicted of a cornucopia of illegal advertising and finance practices.

As far as Tesla sales this year, here are the facts as near as we can determine: Automotive News has estimated Tesla’s reported sales in the US through October were 19,530 units. Actual registration numbers for the same period were 11,731 cars, a full 40% below the sales figures. Further, these registration figures show Tesla off 22% from the same period in 2013. Other sources have pegged the drop off at 26% this year. This may explain why Tesla may be dabbling in the fleet market for the first time, as pictured above.

Elon Musk responded to these reports by saying they are selling every car they build and his team issued a response saying that don’t report monthly sales because, “the media tends to read all sorts of nonsense into deliveries.” They also pointed out that a car could be sold one month and not registered until the next. Why, yes, just like every other automaker.

If GM or Ford stopped reporting monthly sales and started spewing such drivel, the press would vilify them but the rules are different for Musk. If he told the media that Tesla sold 200,000 cars one month, outsold all the other luxury carmakers combined and that he personally just got back from Mars, the slobbering press would not question him and resultant news stories would send Tesla stock into orbit.

Don’t get us wrong. We think that a new auto company selling 15,000 high dollar electric cars annually in the US through a unique, direct sales channel is an incredible accomplishment.

The Tesla Model S is one of the most innovative cars available today and Musk is one of this century’s greatest entrepreneurs, not to mention an amazing PR man. Who cares if can’t tell us the truth about how many cars his company sells?

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  • Jimbob457 Jimbob457 on Dec 16, 2014

    Tesla shares certainly look like a bubble to me. They have actually made the classic "head and shoulders" pattern recently. As of 16Dec14 - $197 down from $297 in 90 days. They have a single luxury product with a limited and easily saturated market. Always dubious, their big upside story that the world is running out of oil has once again been debunked by recent events. Its basic technology cannot provide enough range between refueling witch takes way too long. A beautiful and well-engineered toy.

    • Vulpine Vulpine on Dec 17, 2014

      "They have a single luxury product with a limited and easily saturated market", which apparently isn't saturated yet with a total of over 50,000 cars sold since the model came out and apparently still selling them faster than they can make them. Inventory? As the original article's commenters pointed out, the likelihood of any standing inventory awaiting shipment overseas is rather high. Considering the cost of shipping on those purpose-built car-hauling ships is probably rather high, they probably want to fill the ship rather than trying to go "space-A" on one.

  • Baconator Baconator on Dec 17, 2014

    This whole flap goes back to one Merrill analyst who is (1) excluding some international registrations, for which data is not available, from his estimate, (2) making a very debatable assumption about the average transaction price of a Tesla to estimate how many units are represented by the in-process inventory dollar figure, and (3) assuming that all in-process inventory represents undelivered finished units of Model S sedans. This is a bogus flap. Honestly, from a stock price perspective it's almost irrelevant whether Tesla sold 15k cars or 25k cars this year. Their current enterprise value is 9.2x sales. It could be 15x or 7x - it's still way beyond the peer group of other automakers. To believe the company's current value is warranted, you have to believe that the company will sell a couple hundred thousand vehicles a few years from now and beyond, at a profit. I wouldn't bet against Musk's team pulling that off - people thought the Honda 600 was just a hippie toy back in the 70s and look how that turned out - but it's not a sure thing that they will.

    • See 1 previous
    • Petezeiss Petezeiss on Dec 18, 2014

      "people thought the Honda 600 was just a hippie toy back in the 70s" And it absolutely *was* that in the beginning. Dave, my boss on my first student job drove the wheels off his, ponytail flying in the windows-down turbulence as he tried to beat all the other townies off campus at 5 pm. Dave had dropped out of the physics program to endure a state-employee service job so he and some fellow hippies could buy a farmhouse and about 20 acres. So instead of going hard-core hippie and doing a completely independent gig untethered from the Man, like Tesla, Dave remained dependent upon the existing infrastructure for sustenance, like his Honda.

  • Cprescott It is ugly enough. But why? You refuse to build enough of your products for your consumers.
  • Cprescott Only if your income also gives you more votes.
  • MrIcky It's always nice to see a car guy put in charge of cars instead of an accountant. I wish him well and look forward to some entertaining reveals. I think he and Gilles may be the only industry people that I actually enjoy listening to.
  • Master Baiter It doesn't matter whether autonomous vehicles are better or worse drivers than humans. Companies with deep pockets will find themselves sued over incidents like this. Enough lawsuits and the whole business plan collapses. Cheaper to just put a human behind the wheel.
  • MaintenanceCosts How many dogs are wiped out by human drivers annually?Which type of driver wipes out more dogs per mile? Per trip?Without some context there's not much information here.