‘Legacy’ automakers blow on Tesla’s neck

Tesla continues to dominate the U.S. battery electric vehicle market, with its Model Y and Model 3 being by far the bestsellers in the emerging BEV segment. But an assortment of competitors are racing to catch up, including Ford Motor Co., it’s Mustang Mach-E third on the all-electric sales charts.

Tesla is still the dominant player in the electric vehicle market right now, with the Model Y being the best-selling electric vehicle in the United States.

Several things are reshaping the race for dominance in the BEV market. These include a surge in demand for all-electric models, rapid product expansion giving buyers many new options, and an aggressive game of catch-up being played by traditional automakers like Ford, Hyundai, Kia, General Motors and Stellantis. Add the arrival of new all-electric entrants such as Rivian and Lucid, and things get even more competitive.

And while Tesla is expected to continue to increase its overall volume, its market share is plummeting. Where it accounted for more than three-quarters of all new BEVs sold in the United States last year.

According to Morgan Stanley, Tesla made up just over 60% of the U.S. market through the end of July, and some analysts expect it to fall below 40% by the end of 2023, one analyst very respected anticipating that he might dive. to as low as 11% by 2025.

go all in

The automotive industry is betting big on the switch to battery-electric propulsion. Combined worldwide spending will exceed at least $500 billion by the end of the decade, according to a study published earlier this year by AlixPartners.

They really have no choice. European regulators effectively want to end sales of new vehicles with internal combustion engines by 2035. This is the same target now set by the State of California, with no less than 17 other states set to adopt its zero-emissions guidelines. President Joe Biden, meanwhile, has set a goal of achieving a 50% market share for plug-in vehicles by 2030.

Tesla Model 3
The Tesla Model 3 is the second best seller in the US electric vehicle segment.

Although the US market still has a long way to go, proponents insist it is moving in the right direction. BEVs accounted for just 1% of the market in 2019. That figure rose to around 7.5% in August, according to Steve Majoros, Chevrolet’s chief marketing officer. In terms of vehicle registrations, they accounted for 4.9% of new vehicles in the first seven months of this year, nearly double the 2.6% share through July 2021.

Still the best dog

Who will win the race, however, is far from certain. So far, Tesla has clearly been in the catbird seat. And, although it faces many new competitors, it remains the dominant player.

American motorists bought 116,673 Tesla Model Y SUVs between January and July this year, along with 108,809 Model 3 sedans. Sales of the automaker’s original Model S and X models lost momentum, generating a total of 34,254 sales during the period. Significantly, that was enough to continue dominating the US premium vehicle sector, which includes mainstream products like the Mercedes-Benz S-Class and BMW 7-Series.

But a closer look reveals that a lawsuit is pending. Ford’s Mach-E generated 22,525 sales in the seven months to July, surpassing sales of the gas-powered Mustang coupe in some months.

2022 Ford Mustang Mach-E GT Performance Pack - side deck
Tesla has more than 60% of the U.S. sales market, but rivals like the Ford Mustang Mach-E are making inroads.

Ford’s new Lightning has yet to break into BEV’s top 10 sales charts, but may soon rise to the top. After a slow ramp-up and continued expansion of its manufacturing plant, the all-electric pickup could see its production capacity increased to 150,000 or more per year. Ford claims to have at least 250,000 orders for the Lightning on hand. The company also has innovated Friday on BlueOval City, the 6-square-mile campus that will build more electric vehicles as well as battery packs. It should be operational by 2026.

Tesla reportedly has reservations for up to 1 million Cybertrucks, but it has repeatedly delayed the launch of the vehicle and many observers wonder if it can actually get close to that number that will translate into purchases. One of the main reasons is that there is a flood of competition ahead. According to the Detroit Bureau’s tally, there could be as many as a dozen or more all-electric pickup trucks available by the middle of the decade. These will include the Lightning, GMC Hummer and Sierra SUV, Chevrolet Silverado EV, Ram 1500 EV and entries from Toyota, Hyundai and others.

Notably, this could include multiple mics from startups like Rivian’s R1T.

In total, the number of long-range BEVs has increased from around 15 at the end of 2021 to 50 planned by the end of this year. And AutoForecast Solutions estimated the likely count at more than 140 by 2025.

Add to range?

Hyundai Ioniq 5 2022
With a new entry like the 2022 Ioniq 5, Hyundai and its sibling, Kia, hold three of the top 10 electric vehicle sales locations in the United States

Tesla, however, has few new products coming. Beyond the Cybertruck, it only confirmed the addition of a second-generation Roadster. And CEO Elon Musk said earlier this year that he had indefinitely delayed development of more affordable models than today’s Model 3 and Model Y.

Currently, the average BEV rolls off the showroom floor for around $65,000 according to Cox Automotive and Edmunds estimates. General Motors and Honda, among others, hope to finally offer products that can target more traditional buyers. The Chevrolet Equinox GM announced last month is promised to start at just over $30,000.

Electric vehicle subscription startup Autonomy sees Tesla’s share already falling, even as it ramps up production at its second US assembly plant in Austin, Texas. That should drop it to 40% or less by the end of 2022, according to Autonomy chief analyst Jesse Toprak. Its dominance, he told Automotive News, will be “increasingly challenged.”

And not just by Ford or GM. South Korean siblings Hyundai and Kia now own three of the 10 best-selling BEVs in the US market, the sixth-ranked Hyundai Ioniq, and the Kia EV6 and Niro ranked seventh and tenth, respectively.

Kia EV6 2022
The Kia EV6 joins its South Korean sibling to take a significant chunk of Tesla’s sales lead.

Toprak isn’t the only analyst who sees Tesla facing an increasingly difficult challenge.

“Tesla didn’t move fast enough…to close the door” on its competitors, John Murphy, senior automotive analyst for Bank of America Research, said during a presentation of its annual Car Wars study in June. Murphy predicts that Tesla’s share will drop to just 11% by 2025. Over the same period, General Motors and Ford Motor Co. will see their share of the emerging BEV market reach around 15% each.

There are a number of things that could impact the shape of the US BEV market by the middle of the decade. Tesla could surprise the market with more products. And it may prove more difficult than expected for its competitors to attract both luxury and mainstream buyers.

There is also the continued shortage of semiconductors, as well as other supply chain disruptions. Legacy manufacturers, as well as some of the fledgling EV makers, have struggled to simply fulfill their current orders because they lack the necessary parts and components. That led GM to cut orders this week for the big GMC Hummer EV pickup. It has 90,000 advance orders but no specific target date to deliver those vehicles to customers.

The chip shortage is expected to stretch into 2023. But automakers have already started lining up increased supplies, and with more new entrants, more new products and increased capacity, they seem ready to pose a serious collective threat to Tesla in the future.

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