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Tesla's (TSLA) Model 3 Takes European EV Market by Storm

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

Tesla Banking Big on Electric Car Revolution

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 sops, cost advantages, stricter fuel emission standards, technical superiority, and increasing adoption from both automakers and customers have turned the fortunes in favor of EVs.

Although electric cars occupy a small portion of the global automobile market, Tesla has acquired a substantial market share within this niche segment. With Model 3 sedan being its flagship vehicle, 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 purchase subsidies. Sales in North America also took a hit. While sales of Tesla Model 3 have not been so robust in the United States and China, the electric vehicle market is certainly gaining momentum in Europe.

Since the launch of Model 3 in Europe early this year, rising deliveries have been boosting Tesla’s sales in the continent. The Tesla 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 Popularity Skyrockets in Europe

Tesla’s (TSLA - Free Report) Model 3 has become the hot-selling car in Netherlands, with year-to-date sales crossing 10,000 units. Undeniably, this figure is massive. This seems to be an impressive feat for a model that started delivery since February 2019. Not many vehicles manage to sell this much even in a year. Reportedly, Model 3 was the third best-selling vehicle in the country in the January-August period, just behind Volkswagen’s (VWAGY - Free Report) Polo and Ford’s (F - Free Report) Focus. Nevertheless, with a surge in deliveries in September, Model 3 is currently the most popular vehicle in the country this year. Markedly, the country’s sales of EV vehicles are leading in the European market, only outperformed by Norway.

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

Notably, Netherlands and Norway have always been a big market for Tesla, even before Model 3 hit the roads. But with the launch of Model 3, Norway and Netherlands are much ahead in the EV game in Europe. With the two countries strongly in favor of the wave toward cleaner energy and greener roads, other European nations are following the suit.

Other European countries like Austria, Belgium, Spain and Italy are also catching up, with more Tesla cars in traffic. While these countries have sold only a few hundred Tesla model X and Model S cars per year over the past few years, they are now witnessing a significant surge in deliveries, with the advent of Model 3. This not just underscores the growing electric revolution, especially in Europe, but also reflects the immense popularity of Tesla cars, particularly Model 3. Tesla sales in the United Kingdom and Germany have also been soaring. Tesla is also dominating the Switzerland market with the launch of Model 3.

It is yet to be seen whether Tesla Model 3 manages to maintain its amazing run in the European market. With the continent targeting to sell at least 1,000,000 EVs in 2020, we believe Tesla’s Model 3 sales should continue soaring as fossil fuel vehicle sales are on a decline.

Will Strong Model 3 Sales Help Tesla Offset Woes?

While Tesla Model 3’s success is remarkable, the company is facing a number of challenges including high costs, stretched balance sheet and cash flow crunch, which are hurting its share performance. With China being the biggest EV market, the country’s economic slowdown is likely to weigh on the company’s prospects.

However, Europe is turning out to be a major market for Tesla. Increasing demand of Model 3 in European markets is likely to offset the firm’s weakness in China. Reportedly, EV sales in the European market increased 34% on a year-to-date basis and the trend is likely to continue, boosting Tesla’s sales. Tesla’s Model 3 production ramp up in China at the Gigafactory 3 plant, production of Model Y and ramp-up in credits from the Fiat Chrysler (FCAU - Free Report) deal are also likely to aid the company to achieve profitable goals.

In light of such factors, we believe that the Zacks Rank #3 (Hold) company — which carries a growth Score of A — is likely to tide over the 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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