U.S. auto sales results for November hit the wires earlier this month. A not-so-bad showing gave investors some optimism, as auto sales for the year are likely to come in stronger than expected with less than a month to go. A relative newcomer to the top of the list, though, has been the Tesla (TSLA) - Get Report Model 3.
Once the electric vehicle (EV) maker found a way to increase production in a meaningful way, the Model 3 quickly vaulted its way toward the top of the sedan list. For the month of November, the Model 3 was the sixth best-selling sedan in the U.S.
Toyota (TM) - Get Report and Honda (HMC) - Get Report dominated the top four, with the Toyota Camry and Corolla taking the No. 1 and No. 4 spots, with the Honda Accord and Civic taking the No. 2 and No. 3 spots, respectively. The Hyundai Elantra came in at No. 5.
Last month, Tesla sold 18,000 Model 3 units and as more configuration options become available, one would expect that figure to increase as Tesla widens its customer base.
There's also the question of how much buyers were influenced by the federal tax credit, which will be reduced for all Tesla models at the start of 2019. Those who rushed to buy throughout November should still get the tax credit, provided they take delivery by the end of the year. It does make one wonder whether sales will dip in December, but if the recent trend suggests anything, that won't be the case.
How high can that trend push the Model 3?
Tesla is reportedly aiming to hit a production rate of 7,000 units per week by year-end. If it can average a run-rate of 6,000 units a week for the month - still a tough task - we're talking about roughly 25,000 Model 3s for the month. That will be a difficult hurdle, but if Tesla can pull it off, there's a chance it could be the top-selling sedan for the month.
Worth noting is that, each car ahead of the Model 3 is seeing a year-over-year sales decline through the first 11 months of 2018, with the exception of the Hyundai Elantra, which is up 4.8%. Five of those eight are seeing double-digit percentage drops as well. Keep in mind that production of the Model 3 really didn't hit its stride until the second half of 2018. For instance, in June, it produced less than 5,000 Model 3 units and roughly 26,000 in the first half of the year.
The company has now produced at least 17,000 units each month since August and momentum seems to be gaining. While it's likely that the Model 3 will be a top-10 selling vehicle for 2018, industry observers are starting to turn their attention to 2019 to see if the Model 3 can maintain that momentum and where it will end on the charts.
Given that many automakers are turning their attention from passenger sedans to SUVs, crossovers and pickups, perhaps the Model 3 can maintain some of that momentum.
This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.