Tesla’s red-hot growth driven by Model Y price cuts

Tesla’s red-hot growth is being driven mostly by its Model Y crossover after price cuts and incentives this year, even though the electric vehicle maker’s other nameplates show mixed results, according to five-month U.S. new-vehicle registration data from Experian.

Including all four of its models, the Texas automaker gained 51 percent in registrations in the January to May period for a total of 270,698 vehicles, Experian data showed. That was good for 60.5 percent of the expanding EV market, down from 67.4 percent a year ago.

Overall EV registrations in the U.S. represented 7 percent of the light-vehicle market in the five-month period, up from 4.6 percent for the same period last year. EV volume rose 68 percent to 447,514 registrations, based on Experian data.

The Model Y, with a starting price of $49,380 with shipping, more than doubled its registrations in the January to May period compared to last year, Experian said. Prior to this year’s price cuts, the Model Y started at $67,440 with shipping.

According to estimates from the Automotive News Research & Data Center, the Model Y was the fourth-bestselling vehicle in the U.S. in the first half of the year, behind three full-size pickups.

New registrations for the Model Y grew 103 percent to 167,900 vehicles in the first five months of the year, Experian said, while the less-expensive Model 3 sedan saw an 18 percent increase to 87,200 registrations. The Model 3 starts at $41,880 with shipping. Buyers of the Model Y and Model 3, which share a platform, can potentially receive a federal tax incentive of $7,500.

“Tesla is gobbling up market share,” said Tyson Jominy, vice president of data and analytics at J.D. Power, which estimates the EV maker was the fifth-bestselling retail brand in the U.S. for June. “Tesla may not lose its No. 1 seat at the table for years.”

The January to May period saw the midsize Model X crossover, which starts at $100,130 with shipping, gain 7 percent in new registrations for a total of 10,263 vehicles. But the Model S sedan fell 59 percent compared to the same period last year to 5,335 registrations. The Model S, which shares a platform with the Model X, starts at $90,130 with shipping.

Chevrolet was Tesla’s closest EV competitor brand, with 6.5 percent of the EV market, Experian data showed. But Chevy’s position is based on 29,282 registrations for the sub-$30,000 Bolt EV and Bolt EUV, which will be discontinued at the end of the year. Ford was third with 22,425 registrations for its Mustang Mach-E, F-150 Lightning and E-Transit van.

All of Tesla’s models received sizable discounts starting in January. Along the way, the automaker has made modest adjustments and added incentives, such as free charging at its Supercharger network and trial versions of its advanced driver-assistance software.

In addition to the price cuts, the Model Y and Model 3 regained eligibility for federal EV tax incentives on Jan. 1 under new rules in the Inflation Reduction Act. The Model X and Model S don’t qualify under the new rules because they exceed the act’s price caps of $80,000 for crossovers and $55,000 for sedans.

While some had predicted Tesla would lose its market dominance due to greater competition, the EV leader has been able to leverage growing production at its factories in California and Texas, analysts say. CEO Elon Musk has said the company is willing to give up some profits to maintain growth.

The most popular rival to the Model Y, Volkswagen’s ID4 compact crossover, more than tripled its registrations to 14,094 vehicles in the January to May period compared to last year. Ford’s Mustang Mach-E, also a compact crossover, saw new registrations fall by 29 percent to 10,948 vehicles, Experian data showed. Both qualify for the $7,500 federal tax credit.

Hyundai’s Ioniq 5 had a decline in registrations for the five-month period, falling 3.4 percent vs. the same period last year to 10,406 vehicles. Kia’s EV6, which shares a platform with the Ioniq 5, had a 29 percent drop to 6,780 vehicles, Experian said. Hyundai and Kia both lost access to the federal EV incentive last year because the new rules require North American assembly for a vehicle to qualify.

Market research firm JATO said in May that Tesla’s Model Y has become the bestselling vehicle in the world, regardless of fuel type, with 261,171 deliveries in the first quarter. Model Y sales in China helped the EV maker achieve that milestone.

In the U.S., full-size pickups from Ford, Chevrolet and Ram were the top nameplates, regardless of fuel type, but the Model Y replaced the Toyota RAV4 as the bestselling non-pickup model. The RAV4 can be optioned with a hybrid powertrain.

Toyota’s only EV in the U.S., the bZ4X compact crossover, had 2,985 new registrations in the first five months of the year vs. 180 for the same period last year, Experian said. The bZ4X, imported from Japan, does not qualify for the federal tax credit.

Nissan’s recently introduced Ariya crossover had 3,501 new registrations in the first five months of the year, while Subaru had 2,442 registrations for its Solterra EV that’s built on the same platform as the bZ4X.

A newcomer to the EV crossover segment this year is Vietnam’s VinFast, which had 128 new registrations for its VF8 in the January to May period, Experian said. The VF8 is imported from Vietnam.