Tesla, the dominant player in the U.S. battery-electric vehicle market, is forecast to see its market share collapse over the next 3 years as competitors flood the U.S. with new BEVs of their own, according to the new ‘Car Wars’ study.
The first shots in the battle for dominance in the emerging EV market have been fired, and a new study by Bank of America Securities doesn’t hold a very bright outlook for how Tesla will fare. The upstart automaker today holds an overwhelming 75% of the segment with its four product lines, the Models S, X, 3, and Y.
But legacy brands like Chevrolet, Ford, Hyundai, and Volkswagen — as well as startups such as Lucid and Rivian — will roll out scores of their own products by mid-decade.
And that means Tesla could see its market share collapse by mid-decade, to as little as 11%, according to BoA analyst John Murphy, the author of the annual Car Wars study.
“Tesla didn’t move fast enough … to shut the door” on its competition, Murphy said during a presentation to the Automotive Press Association on Thursday.
Product Programs on Hold
Critically, it has slowed down its vehicle development program, even as competitors are targeting a broad range of new product segments, Murphy pointed out.
First shown in 2019, Tesla has repeatedly delayed the launch of the Cybertruck, indicating it won’t arrive until 2023 at the earliest. And comments made by CEO Elon Musk in recent months have fueled speculation the electric pickup might not even make it into production.
Even if it does, it will follow the launch of the GMC Hummer EV, the Ford F-150 Lightning, and the Rivian R1T, with battery-powered pickups to follow from brands including Chevrolet, Ram, Toyota, even Kia — as many as a dozen overall. The Tesla Roadster and the Semi truck have also fallen behind initial plans.
Under Attack From Top to Bottom
Earlier this year, Musk told investors and analysts that Tesla has put an indefinite hold on the development of products to slot under the Models 3 and Y — the latter SUV now starting at $65,990.
GM recently dropped the base price of its Chevrolet Bolt EV to $26,195, and it is working on a new Equinox EV expected to come in just over $30,000. Honda and GM have expanded their EV joint venture, and both want to launch new models starting at under $30,000.
Mercedes-Benz, BMW, Lucid, Cadillac, and other high-line brands are going after Tesla’s top-line products, the Models S and X — both of which have gone years without major updates.
While the final count is uncertain, GearJunkie estimates the number of all-electric models available in the U.S. will at least triple by the end of this year, to more than 50. That’s widely expected to approach 200 by mid-decade.
GM alone is working on 30 BEVs scheduled to debut by 2025 — though some likely won’t be offered in the U.S. Ford’s Mustang Mach-E is now the third-bestselling BEV on the market.
Ford also has more than 200,000 backorders for the F-150 Lightning. It is investing $5.6 billion in Blue Oval City, a manufacturing complex near Memphis slated to be Ford’s biggest ever when it opens around 2026.
Those two manufacturers are each expected to hold about a 15% stake in the U.S. BEV market by 2030, compared to as little as 11% for Tesla.
‘Giant Money Furnaces’
The nearly sevenfold plunge projected for Tesla’s market share can be a bit misleading. By mid-decade, the overall market for battery-electric vehicles is expected to grow almost exponentially. It has already shot up from a 1% share of total U.S. new vehicle sales in 2019 to a current 5%.
The general consensus is that battery vehicles will jump to as much as 20% by 2025. And that’s at the same time the market is recovering from the current downturn.
This year, automakers are forecast to sell about 700,000 BEVs in the U.S. By 2025, that could reach as much as 3.5 million.
But where companies like GM, Ford, Hyundai, and VW will see double-digit — even triple-digit — annual sales surges, Tesla will struggle to achieve “single-digit compounded annual growth rates (CAGR),” analyst Murphy told GearJunkie by e-mail.
If Tesla were only selling vehicles in the U.S., that would be disastrous. It would hardly match the capacity of the carmaker’s two American assembly plants: the original factory in Fremont, California, and the newly opened plant in Austin, Texas.
That would be particularly worrisome for the automaker considering the new plants in Berlin and Texas are “giant money furnaces,” according to Musk, and will be until they can roll out vehicles closer to their production capacity.
But Tesla is targeting the global market for battery-electric vehicles. And demand is expected to grow substantially faster in China and Europe — where it operates plants in Shanghai and Berlin — than in the U.S.
“The large majority of Tesla’s near-term growth (~5 years) is going to be in Europe and China, which explains why although we have US volumes only growing at a high single-digit CAGR, we have (global) total Tesla volume growing at ~20% CAGR,” Murphy said in an email.
How much the battery-car market actually will grow is a concern facing not only Tesla but all those new competitors. One of the biggest challenges, according to the analyst, is driving down costs.
Today, the average BEV costs a manufacturer about $42,000 to build, or $10,000 more than a model using an internal combustion engine.
Manufacturers had hoped to narrow the gap but, if anything, it’s been widening this year. The price for the lithium used in today’s batteries has risen sevenfold in 2022. In an interview this week with the Bloomberg news service, Stellantis Chief Manufacturing Officer Arnaud Deboeuf warned that if EV costs can’t be reined in, “the market will collapse.”
Murphy is a bit less apocalyptic but warns that if BEV prices continue to climb at the current pace, they’ll capture just 10% of the U.S. market by 2025, rather than 20%. That would translate into a loss of 1.75 million sales that year.
The Car Wars predictions aren’t the only things Tesla should be worried about, Murphy and other analysts warn. The automaker is facing new scrutiny over reported problems with its Autopilot technology. Some recent reports have warned that U.S. regulators could order the recall of more than 800,000 Tesla vehicles.
There’s also the concern that CEO Musk is growing “distracted,” according to Murphy. With so much time being spent on the proposed purchase of Twitter, among other things, “his focus is not on the auto company anymore. And that’s a fundamental negative that will impact (Tesla) over time.” And, if the Car Wars study is accurate, time is not necessarily working in Tesla’s favor.