Tesla TSLA transformed the electric vehicle (EV) market much the same way as Amazon changed the retail landscape and Netflix revolutionized entertainment. When we think of EVs, Tesla’s brand reputation surpasses all others owing to its unique business model and exciting vehicle offerings. Not to forget the company’s charismatic CEO, Elon Musk. The firm has long been riding on its pole position in the EV market and managed to garner the reputation of a gold standard over the years, thanks to its first-mover advantage. But is the EV king slowly losing that advantage? Is Tesla’s EV supremacy under threat?
Indeed, Tesla is flooded with investors’ cash, which reflects in its sky-high valuation (which never really got much to do with the company’s fundamentals) but rising competition has started to give this EV giant a run for its money and challenge its market lead. With various automakers jumping into the EV bandwagon and the market awash with options, customers are also becoming increasingly familiar with other brands and are ever so ready to get their hands on them.
Tesla Market Share Inches Down as Competition Heats Up
Per CleanTechnica, Tesla (despite still being the market leader) accounted for 13.9% of the global EV market share for the January-July 2021 period. This suggests a decline from 18% in the corresponding period of 2020. A recent report from Canalys states that Tesla’s long-term market share leadership is under threat. Per its data, Tesla’s global EV market share for the first six months of 2021 was 15%. This compares unfavorably with 19% share in the first half of 2020.
While Tesla still dominates the United States, it is Volkswagen VWAGY that has taken the lead in Europe, thanks to high demand for VW ID.3 and other models. Per Canalys, Volkswagen’s worldwide EV share in first-half 2021 was 13%. Renault SA RNLSY is also stealing Tesla’s thunder in the continent with its Zoe model.
SGMW — a joint venture between U.S. auto giant General Motors GM and two China-based firms, SAIC and Wuling — commanded an 11% global market share in the first half of 2021. The company’s Hongguang Mini EV zipped past Tesla in China and outsold all other EVs in the nation during the time frame.
Leadership Put to Test
For years, it seemed that Tesla was the only automaker that was playing at the forefront of the EV phenomenon. When it introduced Models S, X and 3, there was virtually no competition, which was one of the biggest advantages for the firm. While there were a few automakers dabbling in EV projects, they were nowhere close to Tesla and consumers thinking of getting an electric car hardly considered any other option seriously.
However, of late, things are changing as various big and small carmakers have started taking the concept of green vehicles seriously from a real-world functionality standpoint. Per BloombergNEF, there were 18 EV models available in North America in 2017. Cut to the present, there are more than 50, and a wave of new models are expected to hit the markets in the coming years. With mounting competition in the market and no dearth of options for customers, Tesla’s leadership in the EV game will be largely put to test.
Lately, various auto biggies including General Motors, Ford F, Volkswagen, Daimler AG, BMW AG, Toyota and Honda are revving up investments to develop eco-friendly vehicles and upping their ante in the battery technology domain. Ford’s Mustang Mach-E, whose deliveries began in late 2020, has received strong reception from the public and is already one of the hottest-selling EV models in the U.S. market. Volkswagen’s ID.4 is also set to give a stiff competition to Tesla Model Y. High-end offerings from Porsche and Lucid Group stack up well against Model S.
While Tesla’s market share position in Europe is under threat amid models like Renault Zoe and VW ID.3/ ID.4, intensifying rivalry in China is also concerning. China is Tesla’s fastest-growing foreign market and in a bid to bank on the booming prospects of e-mobility in the nation, the company has also built its production base in Shanghai. But it is facing stiff competition from SGMW. Warren-Buffett-backed BYD Co. BYDDY is going from strength to strength. Other China-based EV players including NIO Inc. NIO, dubbed as the “Tesla of China”, Li Auto and XPeng are also gaining wide popularity with their offerings on the home turf.
While increasing competition is a positive for global electrification, it does not bode too well for Tesla, which is contesting with legacy auto giants as well as pure EV players. And as if that was not enough, tech biggies like Baidu, Alibaba and Apple are also driving into the much-crowded EV lane, which will further stir up competition.
Loses Initial Advantage in E-Trucks
While electric cars are taking off in a big way, the pickups have been rather slow in shifting gears to electric. Well, that’s about to change soon. But what’s worth noting here is the fact that Tesla will not boast an initial advantage when it comes to e-trucks as it had with electric cars.
Tesla generated a lot of buzz when it first announced the radically designed Cybertruck in 2019. Such was the overwhelming response for the truck that it received 250,000 bookings in just a week from being showcased. While it was initially scheduled to hit the roads by 2021-end and become the first e-pickup to foray into the markets, the production of the same is now being deferred to late 2022, with volume recognition not expected until late 2023. In that case, Tesla will not enjoy the benefit of being the first electric truck in the market.
It will have to compete with Rivian’s R1T, General Motors GMC Hummer and the much-anticipated Ford F-150 Lightning Pro. Rivian recently announced that the first edition version of its all-electric R1T pickup truck has an official EPA range of 314 miles on a single recharge. Deliveries of the “Launch edition” R1T truck is likely to commence this month, and if it does, it will become the first e-truck to debut in the market.
Deliveries of General Motors’ GMC Hummer — with an expected range of 350 miles — are also set to commence later this year. Finally, we have Ford’s F-150 Lightning, which is due in spring 2022. Cybertruck, will thus, be the last among these much-awaited trucks to hit the market. Well, missing deadlines is not something new for Tesla, with delay of Model 3 being the most significant one, but the company had an advantage back then due to lack of competition. This time around, it won’t have that advantage.
Since we’re talking about delays, the firm recently adjourned deliveries of the new version of electric car Roadster until 2023 on supply chain disruptions. Tesla Semi, which was set to begin production in 2019, has also been pushed back. Musk alerted in April that the mass manufacturing of battery cells required for Tesla Semi will take roughly 12-18 more months.
If Tesla continues to fail to meet the promised deadlines, it might become difficult for it to maintain its global EV leadership in the long run, given the rife competition. The company needs to attain high growth to support its lofty valuation, and all that hinges on how timely it can execute strategies as well as stay focused on innovation and differentiated products. Tesla currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.