In surveying the U.S. auto market, California is both the Wild West and the promised land for car companies. As the nation’s largest buyer of new cars , the California consumer base offers a genuine opportunity for automakers, yet stricter fuel efficiency standards shift consumer tastes toward electric vehicles and foreign cars far more than the rest of the country. That helps to explain the rise of Tesla (NASDAQ:TSLA) in the California luxury market, where German automakers still hold sway.
California’s top luxury models
The California Auto Outlook issued for the California New Car Dealers Associations (CNCDA) showed the Mercedes-Benz (DDAIF.PK) taking the sales prize among luxury buyers, with 17,484 cars sold in 2013. BMW’s (BMAXY.PK) 5-Series took second place, with 12,972 units sold, and it was Tesla in third, with 8,347 Model S electric vehicles moving in California in 2013. Tesla was able to handily top the sales of the Lexus (NYSE:TM) GS (5,052 cars) and Audi (VLKAY.PK) A6 (3,735 cars).
In luxury SUVs, the Lexus RX dominated in California, selling 17,799 units in 2013, more than double the number of the second-place BMW X5. Surveying the top sellers in any category, a familiar car held the top position.
It’s still the Prius’s world
California car buyers’ shift toward hybrid and electric vehicles continued in 2013. The Toyota Prius repeated as the biggest seller of any vehicle in California in 2013, the CNCDA report showed, with hybrids taking a 6.8 percent share of the total market. This number excludes all-electric cars as well as plug-in hybrids.
If the emission standards in place in California are a harbinger of things to come in the rest of the United States, automakers with hybrid and electric vehicles in the works stand to benefit. However, combustion cars with top fuel ratings are doing just fine in California.
According to the California Auto Outlook report, the Honda (NYSE:HMC) Civic trails the Prius only by a few thousand units on top of the California leader board, followed by the Toyota Corolla. Midsize car sales show a similar emphasis on efficiency, with the Honda Accord topping all cars, followed by the Toyota Camry.
Tesla’s next phase
The rollout of the Tesla Model X sport utility vehicle should give the Palo Alto-based automaker a weapon to expand its grip on the California luxury market. However, the development of an electric car costing less than $40,000 remains the most prized commodity in the industry. In California, it’s easy to see such a car challenging the Prius, which sold 69,728 units in 2013.
Tesla is trying to increase its production output several times over with the opening of its new battery factory. According to CEO Elon Musk, the Tesla factory will crank out lithium-ion batteries on a unparalleled scale. Now that luxury car buyers in California have gotten on board, the rest of the market awaits.