Tesla is still the top-selling electric vehicle brand in the US, but its dominance is waning as competitors offer a growing number of affordable models, according to a Tuesday report by S&P Global Mobility.
The data company noted that Tesla’s market share of newly registered EVs in the U.S. was 65% in the third quarter, up from 71% a year ago and 79% in 2020. S&P forecasts Tesla’s EV market share to grow to less than 20% will decrease. by 2025, with the number of EV models expected to increase from 48 today to 159 by then.
A decline in Tesla’s U.S. market share was expected, but the speed of the decline could be worrying for investors in Elon Musk’s auto and energy companies. As Musk focuses on fixing his recently acquired social media company, Twitter, Tesla shares were trading around $180 as of Tuesday afternoon. Tesla stock is down nearly half since the start of the year.
S&P reported that Tesla is slowly losing its stranglehold on the U.S. electric vehicle market to all-electric models, which are now available in price points below $50,000, where “Tesla isn’t really competitive yet.” Tesla’s entry-level Model 3 starts at about $48,200 with shipping included, but the vehicles are typically sold with options at higher prices.
“Tesla’s position is changing as new, more affordable options come out that offer the same or better technology and manufacturing setup,” S&P said in the report. “With growing consumer choice and consumer interest in electric vehicles, Tesla’s ability to maintain a dominant market share will be challenged going forward.”
The new data follows a Reuters report Monday that Tesla is developing a revamped version of its entry-level Model 3 that aims to lower production costs and reduce interior components and complexity.
During the company’s third-quarter earnings call in October, Musk said Tesla is finally working on a new, more affordable model that he first teased in 2020.
“We don’t want to give exact dates, but obviously that’s the main focus of our new vehicle development team,” he said, adding that Tesla has “completed the engineering for Cybertruck and for Semi.”
He described the future vehicle as something “smaller” that “will exceed the production of all our other vehicles combined.”
Stephanie Brinley, associate director of AutoIntelligence at S&P Global Mobility, noted that despite the decline in its market share, Tesla’s sales are expected to increase in the coming years.
Tesla’s current leadership position in electric vehicles spans a relatively insignificant market. Despite all the attention electric vehicles are getting, sales of all-electric and plug-in hybrid electric vehicles — which include both electric motors and an internal combustion engine — remain tiny.
Of the 10.22 million vehicles registered in the U.S. in the third quarter, about 525,000, or 5.1%, were all-electric models. That’s up 334,000, or 2.8%, through the third quarter of 2021, according to S&P.
The majority of EVs registered through September — or nearly 340,000 — were Teslas, according to S&P. The remaining vehicles were very unevenly distributed over 46 other nameplates.
But Tesla’s success in the market, coupled with government incentives, has all but forced traditional automakers to scramble in the growing EV segment.
The Ford Mustang Mach-E, which ranks third in EV approvals, is the only non-Tesla vehicle in the top five rankings, according to S&P. These EVs were followed by the Chevrolet Bolt and Bolt EUV, Hyundai Ioniq 5, Kia EV6, Volkswagen ID.4 and Nissan Leaf.
S&P noted that most of the growth in electric vehicles is coming from current owners of Toyota and Honda vehicles. Both automakers are known for fuel-efficient vehicles, but have been slow to transition to fully electric models.
To curb CO2 and other emissions from traditional gas-powered vehicles, several states and the federal government are promoting the transition to all-electric vehicles with incentives such as tax breaks.
The non-profit International Council on Clean Transportation estimates that transport is responsible for 25% of CO2 emissions from human activity worldwide.