Metric sales

Is market share the right metric to assess the future of Tesla and electric vehicles?

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Posted on EVANNEX on November 03, 2021, through Charles Morris

“Americans don’t buy electric vehicles, they buy Tesla,” CNBC recently read, and that’s a fair assessment. In the United States, Tesla’s share of the electric vehicle market is similar to Bob Marley’s share of the reggae market. According to auto industry analyst IHS Markit, 79% of electric vehicles sold in the United States in 2020 were Tesla.

Tesla has a significant share of the electric vehicle market everywhere, but its lead is much larger in the United States than in China and Europe, where strict emissions regulations have forced domestic automakers to quickly ramp up the voltage. In the absence of significant government incentives, US automakers have treated electric vehicles as an R&D project, which has allowed Tesla to dominate the still tight market. (Industry watchers expect EVs to account for just under 4% of the total U.S. auto market in 2021.)

“It’s no surprise that Tesla still dominates sales of electric vehicles, as only they have truly booming viable products,” Michael Fiske, associate director of IHS Markit, told CNBC.

This is about to change. American automakers are stepping up their electric vehicle efforts and starting to target the types of vehicles Americans buy. Ford’s F-150 Lightning is already in pre-production. It’s almost certainly going to beat Tesla’s Cybertruck in the market, and there’s every reason to believe it could be a solid seller, if Ford chooses to push it.

Chevrolet’s electric Silverado could hit the streets in about a year. Dilapidated startups also challenge the young king: Rivian and Lucid are already delivering vehicles. And the Chinese are coming: Xpeng and NIO are already shipping products to Europe, and Sino-Swedish Polestar delivers vehicles to the United States.

Almost all experts predict that Tesla will soon be overthrown from his electric throne. “In a growing market, it is extremely difficult to maintain a majority market share,” says Michael Fiske. “As we start to move towards a bigger and really bigger number of manufacturers who are going to play in space, Tesla has to lose some share.”

IHS Markit expects Tesla’s pure electric vehicle market share this year to fall to 56% in 2021 and 20% by 2025. LMC Automotive, another automotive industry forecasting company, s ‘expects GM to supplant Tesla as the biggest seller of electric vehicles in the US market on this date (as does GM CEO Mary Barra).

Above: Some thoughts from Wall Street analysts and investors regarding market share, electric cars, and Tesla (YouTube: CNBC Television)

There is a lot of talk about pies and their division, but a pie isn’t really a good metaphor in this case, because once a pie is baked it doesn’t grow big, and once eaten it is gone. A better metaphor for the auto market might be a litter of kittens. Suppose a particular staff has three orange kits and one white. In the absence of veterinary intervention, there will soon be another litter, and another. As cats proliferate, the market share of orange cats may decrease, but their total number will increase. (According to the Animal League, an unsterilized cat can produce up to 8 million feline offspring in 8 years.)

Of course, automobiles don’t breed like cats, thank goodness, but the point is, the overall EV market is growing rapidly, so a loss of market share won’t necessarily translate into lower overall sales. Another way to look at it is that there is no such thing as an “electric vehicle market”. There is an automotive market, of which EVs are a growing share.

Non-Tesla automakers are going to take a growing share of that growing share, and that’s good news for all air-breathing creatures. As Elon Musk has said time and time again, Tesla wants everyone to drive an EV, whether it’s a Tesla or not. In fact, when the Fab Five founded Tesla, they didn’t see it as a high-volume automaker, but rather as a kind of gadfly that would make big companies go electric. Now it is happening, about 12 years later than they expected.

My take is that the experts are right when they say Tesla will lose market share in the years to come, but wrong when they assume it will be a disaster for the company (at the time of ‘write these lines, the stock market seems to agree with me). However, predicting the future of Tesla and the auto industry is a perilous proposition. There is a huge amount of future growth built into the Tesla share price, and that growth could be lower than expected.

On the other hand, as someone who has observed the growth of the electric vehicle market from the start, I am still far from convinced that Big Auto will deliver on its electric promises, especially if the political winds turn right in the United States. United, as they will probably be in a year from now.

Whatever happens, the auto industry is going to be in a state of revolution for at least a decade to come, and there will always be a lot of work for pundits, pundits, and polemicists.


Written by: Charles Morris; Source: CNBC