With so many new and excellent EVs going into production, Tesla's share of the electric vehicle market will plummet over the next four years, and it is General Motors and Ford who are poised to eat most of Tesla's lunch, a new report says. Tesla has held about 70 percent of the EV market share in recent years. That is forecast to drop to a mere 11 percent over the next four years, says John Murphy, the Bank of America analyst behind the annual Car Wars report that looks at the auto industry and predicts which companies are on a winning path and which are not.
Murphy, who heads Automotive Equity Research for Bank of America, expects 40 percent of nameplates will be EVs by the 2026 model year, with GM, the Korean automakers, and European automakers as the most aggressive in pushing them. GM and Ford will see their piece of the EV market jump to 15 percent each—which will be higher than Tesla's, Murphy said at an Automotive Press Association event in Detroit. Tesla has its CEO Elon Musk to blame. Tesla largely operated in a vacuum for 10 years, with little competition. "That vacuum is now being filled in a massive way over the next four years by very good products," Murphy says.
"One of the biggest mistakes that we are going to look back at in five or 10 years is that Tesla didn't take greater advantage of the free money he could have gotten, raised much more, opened capacity faster, grown much faster, and shut the door," Murphy said. "He didn't. He didn't move fast enough. He didn't recognize what was going on in the market and showed tremendous hubris that they would never catch him, they would never be able to do what he is doing. Had he taken advantage of that free capital and not had the hubris, he would have done more but didn't. That was a major, major competitive mistake."
Musk's apparent idea that the supposedly unsophisticated auto industry didn't know how to manufacture came back to bite him when he learned firsthand how hard it is to make cars, learned that those legacy techniques work, and was forced to adopt them. "That was a big miss on his part," Murphy says.
Tesla, and Musk himself, have a big fanbase who are loyal buyers. But the number of fans with blinders, who do not see Tesla faults or the attributes of competing vehicles, is not enough to sustain current market share. And the fanbase is shrinking. And Tesla is losing some buyers who have run out of patience with quality issues and aging models. Then there are those who have had enough of Musk's public and sometimes offensive or political comments and stunts.
Musk's mouth in the form of provocative statements and tweets, and his distractions such as buying Twitter, are clear examples that the CEO's focus is not just on the auto business, which is a fundamental negative that will hurt the business over time, Murphy says. Tesla could also find itself competing with other automakers for green capital, so he could be competing in product and in the capital market in the future, areas where he previously held court. Tesla's plummeting sales will be most dramatic in North America, more moderate in Europe and China, Murphy says. This year's Car Wars report forecasts 1 million EVs will be sold this year; 1.7 million in 2023; 2.5 million in 2024 and 3.5 million in 2025, or 20 percent of total U.S. sales.
Looking at how automakers will fare overall in the next four years, Ford will benefit from having the newest showroom. Fresh product leads to greater market share and profitability. Ford is poised to replace models representing 95 percent of its 2022 volume by 2026. Toyota will replace 93 percent; the the Koreans will overhaul 92 percent; and General Motors will update 90 percent. At the bottom are Nissan at 71 percent and Stellantis at 66 percent, according to the report.
As a result, Murphy predicts Ford, Toyota, and the Korean brands will gain total market share, GM and Honda will remain neutral, and Nissan and Stellantis will lose market share. With older models to move, Nissan and Stellantis could be the price spoilers who upset the apple cart going forward by offering incentives that the rest of the industry won't need and want to avoid.
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