Tesla’s market disruption may lead to healthy slice of global auto market: Mizuho

Tesla

Tesla (NASDAQ: TSLA) is expected to control 10% of the global automotive market in the coming years, analysts from Tokyo-based Mizuho Bank said in a recent note to investors. Tesla’s disruption of the global automotive market through its high-tech and affordable electric vehicles could ultimately lead to the company producing 1-out-of-10 cars on the road in the coming years.

Over the past few years, the transition to electrification in passenger vehicles has accelerated greatly, mostly due to Tesla’s mainstream success as an automaker. The company’s influence on the global automotive market has been identified as disruptive and has caused OEMs like GM, Ford, and others to consider rolling out new electrified models, a plan that has culminated in some of the largest car companies in the world to change their long-term supply chain plans. Instead of focusing on purchasing combustion engines, these legacy automotive companies are opting for battery cells instead, making lofty but sufficient manufacturing goals that hint toward a future of fully electrified fleets.



Tesla has captured a considerable portion of the battery electric vehicle (BEV) market over the past four years, mostly due to its introduction of mass-market EVs that are affordable and land around the price point of an average new car in 2021, according to Kelley Blue Book. While Tesla has raised prices on many of its models over the past several months as the company, among others, combats a global shortage of semiconductors and other critical parts of an EV’s DNA, Tesla still holds the reputation for the most advanced electric vehicles on the market at the most competitive prices. For the performance, range, and software that owners receive with Teslas, there isn’t a much better bang for your buck.

Analysts at Mizuho Bank agree, according to a note that the firm sent to investors. While Mizuho analyst Vijay Rakesh identifies the growing global EV market and Tesla’s domination of it, he is aware of incoming competitors. Not signaling that Tesla will encounter tremendous disruption from competitors, new or old, Rakesh’s money would likely be on Tesla if this were a betting situation.

The analyst wrote (via Seeking Alpha):

“Total BEV penetration is at 7.4% in Europe and 6.8% in China, while the U.S. lags at 1.9%. The up and comers still face challenges with VW sales lagging, while GM appears to be getting traction from its ~ $4K HongGuang Mini EV in China.”

Tesla held around 24% of the global BEV market in Q1, mostly due to impressive sales figures of the Model 3 and Model Y combined with Tesla’s continuing trend of Quarter-over-Quarter growth. While this is impressive, the real disruption will occur when Tesla starts to take a substantial slice of the overall automotive market. Rakesh believes the company could achieve up to 10% of the global automotive market, taking more gas-powered engines off the road than many could imagine.

Mizuho is bullish on the idea that TSLA could gain further traction in the EV market by leaving behind legacy companies and newcomers to the BEV sector due to its overwhelming lead in battery tech and autonomous driving developments. The company’s considerable lead in both of these categories makes it a prime candidate to begin even more disruption of the global automotive market. Mizuho believes Tesla could achieve at least 10% of the total market share in the coming years.



Rakesh is ranked 93 out of 7,551 analysts on TipRanks and holds a five-star rating with an average return of 26.3% and a success rate of 69%. He holds Tesla with an $820.00 price target and a “Buy” rating for the stock.

Disclosure: Joey Klender is a TSLA Shareholder.

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