Please ensure Javascript is enabled for purposes of website accessibility

How Tesla Conquered Norway

By Frédéric Lambert - Sep 12, 2013 at 4:07PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Its Model S is not the best-selling electric vehicle, nor the best-selling luxury sedan, but the best-selling car there -- period.

Between Sept. 1 and Sept. 9, Tesla (NASDAQ:TSLA) and its Model S not only outsold every electric vehicle in Norway, but every other car, period. The VW Golf has been the best seller in Norway for months, but reported that in roughly the first week of this month, the market shares of the nation's top three cars were the Model S (6.1%), the Golf (4.9%), and the Mazda CX-5 (4.2%).

Of course, Tesla just started delivering its cars in Norway, so most of those vehicles were purchased -- or rather, reserved -- months before. Lots of Tesla enthusiasts in Norway are still waiting for their reservations, according to Tesla's forum, and the 133 cars which are already on the road will certainly stimulate sales.

Since Norway is a very condensed market, Tesla is betting on its new costumers to create an exponential effect, in which each car on the road results in more sales. Model S owners are known for being very protective of the Tesla brand; in some cases, they prove to get better results than Tesla's actual sales force. During the last annual shareholder meeting, Elon Musk talked about some instances where Model S owners closed as much as a dozen sales/reservations, and he hinted at a possible referral program for owners after a shareholder brought it up. 

The Model S isn't the only hugely popular electric car in Norway. Nissan (NASDAQOTH:NSANY) sold 448 units of its all-electric Leaf last month to lead the electric car market in the nation, with 3.8% of Norway's total automotive market.  The Japanese car manufacturer will certainly see its share of the market fall in September, since it's the first full month of delivery for the Model S in the country. 

Since gas is expensive in Norway, and the nation offers numerous government incentives to buy electric vehicles, Tesla expected to be popular there. The Model S is almost tax-free, and electric vehicle owners have access to free public parking, toll-free ferry service, and almost no annual fee. 

To meet the expected demand for its cars, Tesla installed 6 supercharging stations throughout Norway, and opened three stores, with two others under way. 90% of Norwegians now live within 320 km of a supercharging station, well within the 500 km range of the Model S.

Source: Tesla's Twitter

This is good news for shareholders, because Tesla's $20 billion market cap is based on multiple future executions, including the company's goal to deliver 40,000 Model S's next year.  Tesla pegs U.S. demand for the Model S at about 20,000 units a year, but Europe's response is more difficult to predict, even though it is a similar market in size. The numbers coming out of Norway are very encouraging, indicating that Europe's demand for the Model S might prove pleasantly surprising. At the very least, the high price of gas in Scandinavia could drive better-than-expected Tesla sales there. 

I remain bullish on the stock, and I recommend investors keep a close eye on the gross margin of the Model S and the number of cars Tesla delivers in the third quarter. Ultimately, by ramping up production and securing better prices from suppliers, Tesla should achieve a 25% gross margin. It needs to get to 19% during the current quarter in order to stay on track for 25% by the fourth quarter.

Frédéric Lambert owns shares of Tesla Motors. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Tesla, Inc. Stock Quote
Tesla, Inc.
$900.09 (4.67%) $40.20
Nissan Motor Co., Ltd. Stock Quote
Nissan Motor Co., Ltd.
$8.06 (0.01%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/15/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.