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Tesla Motors Inc (NASDAQ:TSLA): Is Model 3 The Culprit Behind Poor Nissan Leaf Sales?

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Tesla Model 3’s 373,000 reservations could be a reason why Nissan Leaf has been underperforming in the US

While all the other major gasoline-powered and battery-driven cars put up a mediocre performance in the US last year, Nissan Motor Company Ltd was one of the most underperforming players. Nissan Leaf lost its dominance in the American soil to Tesla’s premium sedan the Model S, despite being less than half its price.

Thus, the Japanese carmaker planned to upgrade the Leaf’s battery pack to 30kWh, becoming the first automaker to update battery pack of a mass-market EV. Soon after, BMW and Volkswagen announced that they would intrude new packs for i3 and e-Golf, respectively.

The new 30-kWh pack should allow the Leaf to travel 107 miles per charge and improve its dwindling performance. Last year, its sales declined about 43% to 17,269 in the US, down from 30,200 in 2014 when it was the market leader.

The battery update for the vehicle should have bump up its sales but the Leaf has continued to head south in the US. During May, the company sold just 979 units, compared to 2,104 units last year. In fact, the Leaf sales at 4,697 units for the first five months of 2016, down 39% year-over-year from 7,742 units.

While the Model S remains the market leader with 8,390 deliveries year-to-month in its home soil, sales of its younger-sibling, the Model X, which has faced a recall and quality issues, stand at 4,850 units which is more than the Leaf sales.

Tesla Model 3’s reservation process led to hundreds of thousands of people outside the company’s stores worldwide. Tesla has received over 373,000 reservations for the $35,000 compact sedan.  Thus, those customers will not likely buy another vehicle in the coming few years while they’re waiting for the Model 3.

Moreover, base prices of Leaf SL and Leaf SV with the new packs are $36,790 and $34,200, respectively, which is in the same price range as Model 3; therefore, Tesla’s first mass-market EV could be the potential culprit behind the Leaf’s dwindling performance.

With its recent attack on the Model 3, it appears that the Japanese automaker is aware of the situation. In April, Nissan promoted an ad which said: “And why drop $1,000 to stand in line when you can get $4,000 cash back and the best-in-class range.”

The ad was also misleading, as it is not the “best-in-class range.” While the Leaf can provide 107 miles per charge, Model 3’s base-model will provide at least 215 mile-range.

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