Tesla claims that the Model 3 has surged to a dominant share of the mid-size premium sedan market in the US.

Except that Tesla compares sales against compact luxury sedans.

And ultimately it doesn't matter, because the Model 3 is capturing electric-car sales, not undermining market share for luxury brands.

Tesla likes to tout sales of its all-electric luxury vehicles against gas-powered competition. But nobody should take Tesla seriously. And it's unlikely the company's favorite targets — BMW, Mercedes-Benz, Lexus, and Audi — are all that worried.

For years, Tesla has been insisting that the Model S is a full-size luxury sedan and comparing its sales to legitimate full-size cars, such as the Mercedes S-Class. In truth, the Model S is a mid-size luxury sedan that's nowhere near as luxurious as the S-Class or other similar vehicles, such as the BMW 7-Series and the Audi A8.

Now, Tesla is claiming that the Model 3 — the higher-priced Premium version, not the el-cheapo $35,000 version that the company is conspicuously not even building yet — is the US market-share leader for mid-size premium sedans ("premium" is Tesla's term, and we could use it interchangeably with "luxury," but in the car business, luxury and premium don't mean the same thing, and I suspect Tesla is aware of this).

At its annual shareholder meeting on Tuesday and then in a tweet, Tesla produced this chart:

So the Model 3 has rocketed to a 30% market share in its segment, against the BMW 3-Series, the Mercedes C-Class, the Audi A4, and the Lexus IS.

Except that those are all compact sedans. The mid-size cars are the BMW 5-Series, the BMW E-Class, the Audi A6, and the Lexus ES.

So to take just one example, the BMW 5-Series moved over 40,000 units in the US in 2017, while the Model S managed 27,000. The 7-Series, meanwhile, sold just over 9,000. Easy to beat that, and therefore the Model S is full-size!

And for what it's worth, the Model 3 is also a compact sedan — but at the moment, it's priced like some mid-sizers. Confused yet?

Tesla's problem with segments

The BMW 5-Series. Hollis Johnson

You can kind of assess Tesla's motives here. And they aren't nefarious (although for car people, they're annoying and sort of suspicious). The company only makes three vehicles and has always had a segmentation problem, so it tries to stretch its vehicles across segments. Thus the yet-to-arrive $35,000 Model 3 could match up against the base BMW 3-Series.

The more expensive Model 3 takes on the 5-Series, again on price — but the 5-Series is more typically more expensive and more luxurious, and forget about the high-performance M5, which for 2018 is $20,000 more than what the high-performance Model 3 will be.

And besides, the Model 3 isn't actually supposed to be a luxury car — it's supposed to be, at the base price, a car for the masses, even though that base price is kind of high (a Toyota Corolla can be had for less than $20,000). So Tesla's comparison undermines its own marketing and might make prospective Model 3 owners wonder why Tesla is picking a fight with the luxury brands in the first place.

A deeper issue with the Model 3

There is also a deeper issue here: Tesla's market-share claims for Model 3 suggest that there's a competition going on when there isn't. Tesla hasn't taken market share from the so-called Tier 1 luxury brands.

Rather, it's expanded the electric vehicle market and has picked up sedan share because that's all it has to sell (some might say that it's expanded the Tesla market, which was capped at about 100,000 globally due to production constraints). Whatever the established luxury brands have given up on sedans, they've restored on SUVs.

And that reveals an even deeper issue, which is that Tesla is selling sedans in a declining sedan market. Its own smaller SUV, the Model Y won't show up until 2020, and in any case, the company has already missed out on three years of booming SUV sales. True, it has had the Model X. But it's also selling that vehicle at a very high price point, while BMW, Mercedes, Audi, and Lexus all have a range of cheaper offerings.

I'm not the first journalist or industry observer to point this out. But Tesla ignores the argument and understandably defines market segments in ways that suit its story.

The ironic thing is that all the Model 3 has to do is sell to be a success, assuming Tesla can figure out how to make a profit on it. It doesn't matter if it by some contrivance outsells traditional luxury brands. Those brands don't entirely care because they're not necessarily committed to outpacing their own demand and messing up their profit drivers.