Electric vehicle makers gain ground on Tesla as Chinese threat looms

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TSLA
sales forecasts may look bad, but the future is positive.

Although the electric car maker’s share of the US market is expected to fall over the next 4 years, sales will grow as a large number of drivers are expected to purchase electric cars.

“Tesla’s dominance in this still nascent market segment may be coming to an end, although it will remain a significant player,” Bank of America said.
BAC
Merrill Lynch said in its latest annual “Car Wars” study. “Our forecast suggests that Tesla’s market share will drop from 70% in 2021 to (approximately) 11% by 2025.”

“While this market share direction is a little daunting, it still means that Tesla is one of the largest (manufacturers) in the U.S. EV market,” the report said.

This might be worrying for Tesla shareholders, but the electric car market is growing so rapidly that even if Tesla were to increase its sales dramatically, its overall market share would fall as the market grows even faster. Despite increased competition, Tesla is expected to retain its preeminence by eventually producing smaller, cheaper electric vehicles for the mass market.

But competition from China could make a big dent in some of those predictions.

A recent report from global consultants AlixPartners shows the expected scale of the booming electric vehicle market. The market share of pure battery electric vehicles (BEVs) in North America will increase from just 3% in 2021 to 28% by 2028. By 2035, it will reach 59%. In other words, electric cars will capture almost a third of the market within five years.

But that pace is pedestrian compared to that of Europe, where BEVs already make up 8% of the market in 2021, according to AlixPartners, and will rise to 44% by 2028 and 83% by 2035.

Ed Kim, an analyst at California-based consultancy AutoPacific, estimates electric vehicles will make up 11% of the overall U.S. market in 2025 and Tesla will take just over a fifth, while maintaining segment leadership.

“While the market share of electric vehicles will skyrocket from 3.3% in 2021 to 11% in 2025, this growth is largely fueled by new market entries from various legacy and start-up automakers. General Motors
GM
Ford engine
F
Company, Stellantis, Hyundai Motor Group, Volkswagen AG and others all have very aggressive electric vehicle launch plans over the next few years, and it will eat away at Tesla’s growth curve.

Stellantis brands include Peugeot, Citroën, Opel/Vauxhall, Fiat, Jeep, Lancia, Chrysler, DS and Alfa Romeo. VW brands include Audi, Porsche, Lamborghini, Bentley, SEAT and Skoda. Hyundai includes Kia.

“Yet that leaves Tesla with more than 22% of the U.S. EV market in 2025, giving it a sizable lead over second-place GM with about 16% and third-place Ford with about 14%,” he said. said Kim.

According to the Bank of America Merrill Lynch report, the overall US electric vehicle market in 2025 for traditional manufacturers will be led by GM, with just over 14%, and Ford with 10%.

“Ford’s strategy to gain EV market share will rely on a few high-volume models like the F-150 Lightning,” the Bank of America Merrill Lynch report said. GM’s approach will depend on “launching numerous low-to-high volume models on Cadillac and other brands.”

South Africa-based Fitch Solutions automotive analyst Koketso Tsoai agrees competition from Tesla is heating up, but it is expected to retain leadership in the electric vehicle sector. Tesla has a weak point in perceived quality, which needs to improve. Tsaoi expects Tesla to move down the market.

“By 2025, we expect a noticeable decline in Tesla’s market share in the United States as the electric vehicle market expands its reach beyond California into states that are not traditionally strongholds. In fact, it’s entirely possible that Tesla’s market share will fall below 50% in U.S. EV sales by 2025 as automakers make drastic improvements through to the introduction of more electrified models,” Tsoai said.

“Beyond that and into 2030, we expect a vibrant electric vehicle market driven by competition. 40% will be difficult to achieve. This will most likely lead the EV maker to tap into the high-volume and affordable small EV segment. In addition, competition in the premium sector will be fierce for Tesla. Tesla will be vulnerable if the build quality doesn’t improve dramatically,” Tsoai said.

Professor Ferdinand Dudenhoeffer, director of the Automotive Research Center in Duisberg, Germany, added some Chinese names to growing competition for Tesla in the high-end sector. He said Geely’s BYD, Volvo and Polestar, Great Wall and SAIC’s Rowe and MG would join the electric vehicle market fray. And Dudenhoeffer said Tesla CEO Elon Musk will eventually change his own strategy.

“Musk’s clear strategy is to go to mass markets,” Dudenhoeffer said.

Electric cars can compete in many segments because basic engineering can be used more widely than in internal combustion engine vehicles, he said.

BYD, which stands for “Build Your Dreams”, overtook Tesla in the global sales race with 641,000 in the first half of 2022, ahead of Tesla’s 564,000. Warren Buffett’s Berkshire Hathaway
BRK.B
owns approximately 8% of the company. Analysts expect Tesla sales to hit just under 1.4 million in 2022.

Dudenhoeffer said BYD is a leader in EV technology with its so-called “blade” battery, which enables higher energy densities and is ahead of the Germans, and Tesla.

According to Dudenhoeffer, the Chinese threat is looming.

“The Chinese are making more and more inroads into the global market and will bring important innovations to the market with electric cars and automotive software in the future. BYD shows what the Chinese can do and how the Chinese are making progress gradually into Western car markets. The heart of the modern car, the electric car, is the battery and it is located in China,” Dudenhoeffer said.

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