BofA Expects Tesla’s US EV Market Share to Fall to 18% as Rivals Ramp Up Production

Bank of America (BofA) analysts expect Tesla’s market share in the US electric vehicle (EV) market to fall to 18% by 2026 as compared to 62% at the end of 2022 as rival automakers ramp up production.

To be sure, Tesla’s market share in the US EV market fell last year also and it stood at 75% in 2021 and 71% in 2020. The Elon Musk-run company’s market share in the US peaked at 78% in 2018.

That said, it’s a different story when it comes to absolute numbers, and last year 484,351 Tesla cars were registered in the US – 41% higher than the previous year.

The anomaly can be easily explained by the rise in EV market share in the US as they accounted for 5.6% of all car registrations last year – as compared to 3.1% in 2021 and 1.8% in 2020. Globally, electric cars accounted for around 10% of total car sales last year which was a new milestone.

The market share of EVs in the US automotive market has tripled since 2020 so despite losing market share, Tesla’s US deliveries have been on an uptrend.

Notably, Tesla’s production ramp-up is a success story in itself and even Charlie Munger admitted that what it has achieved in the automotive industry is a “minor miracle.”

Tesla sold 1.31 million vehicles globally last year and Musk expects the company to produce 1.8 million cars this year – which he said could rise to as high as 2 million if everything goes right.

In Q1 2023, TSLA produced 440,000 EVs and delivered over 422,000 of these. Musk has predicted that the company’s annual production capacity would be 20 million by 2030 – which for context is over twice what market leader Toyota sold last year.

Bank of America Predicts Tesla’s US Market Share Will Fall to 18%

Notably, in absolute terms, Tesla is now pretty much in the league of medium-sized automakers.

During Tesla’s Q1 2023 earnings call, its CFO Zach Kirkhorn said that the company looks at total market share instead of EV market share.

Its US market share is now around 4% which puts it ahead of Volkswagen. Tesla’s Model Y was the best-selling model globally in the first quarter after excluding pickups.

Meanwhile, BofA expects Ford and General Motors to each account for 14% of the US EV market share by 2026. Ford and General Motors respectively had an 8% and 5% market share in the US EV market last year.

However, both these companies are expanding capacity. While Ford expects an annual EV capacity of 2 million by the end of 2026, General Motors expects to have a capacity of 1 million cars by 2025.

General Motors became the first Detroit automaker to commit to a zero-emission future and has said that it won’t sell internal combustion engine vehicles after 2035.

Notably, both Ford and General Motors have separately partnered with Tesla to share its Superchargers.

BYD is the Market Leader in NEVs

Globally, BYD overtook Tesla last year and is the largest seller of new energy vehicles (NEVs) – which include both battery electric vehicles (BEVs) and PHEVs (plug-in hybrid vehicles).

The Chinese EV giant built on its lead in Q1 2023 and delivered 125,000 more vehicles than Tesla. That said, when it comes to BEVs, Tesla is still the market leader globally.

BYD is backed by Berkshire Hathaway and Munger has termed it his best investment. BYD has models across price points and its Seagull hatchback starts at just above $11,000.

Tesla is also working on a low-cost vehicle platform which it might unveil later this year. Currently, Model 3 is its cheapest model and starts at around $40,000 in the US.

Gen 3 – half the cost of a Model 3.
Likely under $20k.
Minus $7,500 rebate.
Minus $1,500 subsidies.

This would mean a gen 3 has a cost of around $10,000. Accompanied with a nearly negligible running cost.

— Tesla Economist (@teslaeconomist) June 16, 2023

However, after accounting for all the available state and federal incentives the effective price can go under $23,000 in a state like California.

Earlier this month, Tesla said that all its Model 3 variants are eligible for a $7,500 EV tax credit in the US. The news helped support the rally in TSLA stock and it is now up 141% for the year.

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