For years, a manufacturer has established itself as the leader in electric vehicles: Tesla. But the company now faces a growing list of deep-pocketed competitors, including General Motors, Ford and Mercedes-Benz, seeking to disrupt its market dominance.
More than a dozen new electric vehicles are expected to hit the market over the next year as automakers embrace greener vehicles. That could spell trouble, auto analysts say, for a company that was once America’s only electric car maker.
“Tesla has been the main player in electric vehicles for so long, but we’re seeing a lot more competition, not only with luxury electric vehicles, but also with consumer vehicles that come in different body types and at different price points. “, says Kevin Roberts, Director of Industry. insights and analysis at CarGurus.
Tesla’s EV market share is expected to drop from about 70% in 2021 to the “low teens” by 2025 due to the onslaught of EVs from other manufacturers, predicts John Murphy, chief executive and Chief Automotive Analyst at Bank of America Merrill Lynch.
“GM and Ford are probably in the best position to compete here,” he says, pointing to the growth of the electric pickup market. “That includes the Ford F-150 Lightning, Chevrolet Silverado and GMC Sierra. The Ford Mustang Mach-E is also very competitive against the Tesla Model Y, and the upcoming Chevrolet Equinox will delight some of its customers with a starting price of around $30,000.
Chief Executive Elon Musk launched Tesla’s latest earnings call with a note of optimism about the company’s near-term growth outlook, telling analysts he looks forward to “an epic year-end.” . But he also said economic slowdowns in China and Europe, along with increases in Federal Reserve interest rates, were starting to dampen demand for the company’s vehicles.
“The request is a little tougher than it otherwise would be,” Musk said. “But as I said earlier, we are extremely confident of a great fourth quarter.”
Even so, a number of analysts have left Tesla’s earnings call uneasy, particularly as competition intensifies. Shares of the company fell about 7% in the hours after Musk’s call and are down 47% year-to-date.
“Tesla is reaching a fork in the road period that Musk needs to navigate the business and will be a moment of truth for Tesla on the demand front,” Wedbush Securities analyst Dan Ives said Thursday in a research note. “This quarter wasn’t rainbows and roses and that leaves investors wanting more from Tesla.”
On Monday, less than a week later, the company slashed starting prices for its Model 3 and Model Y cars by up to 9% in China amid concerns over demand, reversing an upward trend in industry-wide awards this year. Murphy says the price declines in China are not typical of a business with low supply and high demand, and could suggest a “potential weakening of one of China’s key growth markets.”
Such are the trials and tribulations of companies that capitalize on what marketing strategists call “first mover advantage.” They can revolutionize an industry, but what happens when the competition catches up with them? “We always knew that Tesla’s market share would eventually go down,” said Michelle Krebs, executive analyst at Cox Automotive. “People want more affordable electric vehicles and they are coming.”
But even as more electric vehicles hit the market, analysts say name recognition plays a big role in keeping Tesla ahead of the pack. The company launched its first all-electric vehicle in 2008, the Tesla Roadster, which traveled 245 miles on a single charge, unprecedented range for a production vehicle. The company has since launched four electric models, including a fifth, its Cybertruck, in 2023.
“Other automakers are going to have to do a lot more advertising to let customers know they have electric vehicles,” Krebs says. “Tesla has only ever had electric vehicles – that’s what they’re known for.”
Even with stellar ad campaigns, there’s no guarantee competitors will catch up to Tesla. Given the company’s lead in electric vehicles, it also owns and operates the largest fast-charging network in the world, with more than 35,000 Superchargers located along major roads. Roberts says this sophisticated charging network likely gives Tesla another edge over other automakers.
Tesla’s high stock valuation also means the company can raise capital by selling a very small portion of its stock, Murphy says, when other automakers would have to sell a much higher percentage of stock to raise the same. capital.
“Tesla is definitely going faster now than in the past,” he says, pointing to their new factories in Austin, Texas and Berlin. “But we think they should have gone faster and exploited their advantage before the competition started to catch up.”
Musk doesn’t seem worried. He said on the earnings call that the company is in the “final round” of work on its Cybertruck, which will begin production in the middle of next year. He also boasted that Tesla’s market value, now $696 billion, could one day surpass the combined capitalization of Apple Inc. and Saudi Aramco, two of the world’s most valuable companies currently worth more than six times the market capitalization of Tesla, or about $4.4 trillion.
“It’s the first time I’ve seen this potential,” Musk said. “We have the most exciting product portfolio of any company in the world, some you’ve heard of, some you haven’t.”
But the road ahead will test Musk’s leadership and strategic vision, especially as his company enters a new phase in its 19-year history, surrounded for the first time by competitors, many of whom offer cheaper options in a tightening economy. Tesla’s least expensive vehicle starts at $46,990.
“Demand for cars north of $50,000 to $55,000 is limited,” Murphy says. “And if Tesla wants to get to 10 million units and more over time, they’ll have to accept lower prices. And if they get to the 10 million unit number, we think they probably have to have a price average transaction close to 25,000 dollars, against 75,000 dollars currently.
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