According to the news report by Bloomberg, Tesla Inc. has been given permission to begin selling its Model 3 sedan in Europe. The company finally cleared the last hurdle that was standing in its way in launching its best-selling car in the region.
The Netherlands Vehicle Authority, which is the regulatory body on behalf of the European Union, is the governing agency that stated that Tesla’s Model 3 met all the requirements for Europe.
According to MarketWatch, this approval from the European regulator did not come as a surprise. In fact, the electric car company had already opened an online ordering facility for a few European companies earlier in January.
Tesla stated that deliveries of the Model 3 Long Range Battery version were expected to start in February of this year. This is the same model that was first launched in the United States.
According to the blog called Electrek, a shipment of over 1,000 Model 3 sedans had left the docks of San Francisco one week ago. The blog speculated that this cargo was headed for European shores.
According to the Chief Executive Officer Elon Musk, this launch is critical for Tesla since the company is going to face a difficult journey ahead.
The company is already cutting jobs so that it can deliver on the lower-priced versions of the Model 3 profitably. This led to a 7% drop in its share price on Friday, when the news broke about the layoffs and also that the company had reported lower-than-expected quarter 4 earnings.
Tesla’s shares are down by 9% so far this year, vis-à-vis the S&P 500, which has seen gains of 6.5% in the same time period.
With its entry into the European market, Tesla will now be able to directly target the premium car market in the region. Europe is dominated by the likes of Daimler AG’s Mercedes Benz, BMW AG and Volkswagen AG’s Audi. In fact, in its quarter 3 letter to its shareholders, the electric car company stated that the premium mid-size car market in Europe is two times as big as it is in the US.
Besides being a much bigger premium car market than America, Europe is also the hub for electric car sales at this point. In 2018, electric car sales surged 24% in October.
Added to that, Germany is a key market for Tesla, since the electric car maker is looking at building a Gigafactory to manufacture the lithium batteries it needs to run its cars in that country.
In 2018, Tesla became the best-selling luxury car in the US, beating stalwarts such as the BMW 3 series, the Audi Q5 as well as the Lexus models, to name a few. However, investors and analysts alike have seen that competition with the electric car maker actually cuts across traditional segments in the auto market.
According to EvercoreISI’s analyst Arndt Ellinghorst, Tesla’s cars are stealing customers away from market segments that are unexpected. He stated this in a report he released after Toyota Motor Corp.’s Chief Executive Officer of North America Jim Lentz discussed what impact the Model 3 had had on the company’s Prius. Prius is a hybrid model which is not targeted at the luxury car segment.
According to Lentz, Tesla as created a completely new segment of cars that are now being termed technology-driven products.
How long Tesla continues to rule the markets remains to be seen though. This is because traditional car makers are also investing in this segment and are developing their own electric car models.
So far, Jaguar launched its I-Pace fully electric sports utility vehicle (SUV) last year. And Daimler revealed its electric EQC crossover, while Audi launched the E-Tron.