And the “103 days’ supply of EVs” is BS because it doesn’t include Tesla, Rivian, and Polestar, with 65% of US EV sales.

By Wolf Richter for WOLF STREET.

Tesla’s deliveries in Q3 globally rose 27% year-over-year to 435,059 vehicles (419,074 Model 3 and Model Y and 15,985 Model S and Model X, despite the quarter-to-quarter drop of 6.7%, which was caused by “planned downtime for factory upgrades” over the summer. The factory downtime for retooling and expanding production has been discussed for months, including in its earnings call.

Downtime of auto plants for retooling is a standard feature of the auto industry. This occurs every time when models are updated, or when production capacity is expanded.

Tesla reiterated today its delivery target for the full year 2023 of 1.8 million vehicles, which would be up by 37% from total deliveries in 2022.

Production at Tesla, due to this factory downtime, fell 10% in Q3 from Q2 to 430,488 vehicles, but was still up 15% year-over-year.

Rivian, which sells three EV models – a big powerful high-end pickup truck, a similar SUV, and a delivery van – reported today that its deliveries in Q3 grew by 23% from Q2, and by 136% year-over-year to 15,564 vehicles.

It maintained its guidance to deliver 52,000 vehicles this year, which would be up by 136% year-over-year.

No major legacy automaker in the US can get anywhere near these EV sales gains in 2023:

• Total vehicle sales in Q3 in the US, including fleet sales, have risen by around 17% year-over-year, much of it driven by surging fleet sales (we’ll get the data in a couple of days).
• Compared to 2019, total vehicle sales in 2023 in the US are tracking to be down by 10%.

To keep the US decline in deliveries in 2023 from 2019 in perspective: Tesla’s global deliveries of 1.8 million vehicles in 2023 would be 16 times its deliveries in 2019 (112,000).

Rivian’s existential challenge: Ramping up mass-production of an expensive-to-produce product with an immensely complex supply chain burns piles of cash and generates huge losses until volume reaches a certain point, beyond which production becomes profitable, if the pricing assumptions hold.

Tesla went through the same process, burning tons of cash year after year, until volume was high enough, and it started making money, and then lots of money, and is still making money despite brutal price cuts that are shaking up the legacy automakers with their oligopolistic pricing behavior.

Rivian too is burning ungodly amounts of cash in an effort to ramp up production – and to ramp up production a lot faster than Tesla had done. On a per vehicle basis, the losses were gigantic, and as volume ramped up, they are still huge but a lot lower. The question will be if it can get production up enough to where it will break even and survive, if its pricing assumptions hold.

EV pricing assumptions out the window after Tesla’s price cuts. Tesla is now pricing its models substantially below the competing ICE vehicle models.

Ford sells the only other EV pickup truck, but the plant was shutdown to expand production, and now Ford is struggling with strikes. The other legacy automakers are at the announcement stage of their EV pickups. It will take them years to ramp up mass-production of pickups.

Tesla’s Cybertruck is still not in mass-production and for sale, but given Tesla’s recent price cuts, the other EV truck makers may have to revise downward their own pricing assumptions for pickups.

And for a company like Rivian, reaching profitability as its own pricing assumptions get smashed could be an existential challenge.

The “103 days’ supply of EVs” is BS because Tesla, Rivian, and Polestar, accounting for about 65% of total EV sales in the US, don’t have dealers and don’t disclose their US inventories and therefore don’t disclose days’ supply of EVs in inventory.

Estimates of days’ supply of EVs are based on the guesses of the EVs by legacy automakers on dealer lots and in transit. There are now dozens of EV models by all legacy automakers combined, accounting for only 35% of total EV sales.

So these are a bunch of relatively low-volume models where each dealer has between zero and a few in stock and a few in transit and sells a few a month.

For example, there are about 4,000 Ford dealers, and if Ford ever succeeds in building the promised 150,000 Lightning trucks per year — it has been trying to ramp up production but remains far from it — that would be 38 Lightning trucks on average per year for each Ford dealer, or about 3 per months, which is minuscule. So they get 3 per month, and 3 are in transit, for an “inventory” of 6 (on the lot and in transit), and if they sell out of all three on the lot, they have 60 days supply. If the units “in transit” get hung up somewhere or if they sell 2 of the 3 trucks in stock, suddenly they have over 100 days supply. That’s how silly “days’ supply” can be with low-volume units.

This estimate about legacy automakers’ EVs in inventory and in transit, and the small sales volume of each of these dozens of models, was used to come up with 103 days’ supply.

The dual problem that it only covers about 35% of EV sales and is based on dozens of relatively low-volume models by legacy automakers makes this a ridiculous nonsensical metric for the overall EV market. It doesn’t indicate anything about the overall EV market. But it sure was dragged out by the media to create stupid clickbait headlines about collapsing demand for EVs or whatever.

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