When the Tesla Model S debuted in 2012, it shocked the world and changed everything the industry thought it knew about EVs. Before that, the market was making do with the Nissan Leaf and Chevrolet Volt. Granted, both of them proved that EVs could technically be used by normal people in the real world on a day-to-day basis. But the Model S had nearly double the range, and was striking, luxurious, and bespoke as opposed to feeling like a basic economy car that happened to run on electricity. For the last decade, Tesla was miles ahead of the game. The keyword there is "was." The game is all but caught up, and Tesla will soon start feeling the heat. Meanwhile, Toyota and Honda already are.
Tesla's Main Challenge Is Affordable EVs under $50,000
A $50,000 price point is not normally considered "affordable", but in today's price-increasing car market, plus the fact that EVs have always cost more than their gasoline counterparts, $50K is the price that tends to be considered "affordable" for EVs. EVs under $50,000 is also the area that is taking buyers from Tesla the most. The only car Tesla sells under $50,000 is the Model 3, which starts at $46,990, and it does not take many options for it to cross that price barrier.
S&P Global Mobility suggests that most Tesla buyers are "conquests," meaning buyers that switch from one brand of car to another, and about 74% of them come from former Toyota and Honda buyers. Specifically, the Model Y has largely attracted buyers from the Lexus RX, Honda CR-V, and Toyota RAV4, and the Model 3 from the Honda Civic, Honda Accord, and Toyota Camry. A major factor is Toyota and Honda dropping the EV ball. Toyota only this year is releasing the bZ4X, and Honda's EV collaboration with GM, the Prologue, probably not going on sale until 2024.
However, Tesla does not look like it will be overtaken overnight. Of the more than 525,000 new EVs registered in the first nine months of 2022, about 340,000 of them were Teslas. Currently, there are about 47 electric nameplates for sale in the U.S., however, it is predicted that at least another hundred or so will go on sale by the end of 2025. Tesla's Achilles heel will be the fact it is yet to have a car that truly competes in the mainstream EV space with KIA, Hyundai, Volkswagen, Chevrolet, the Nissan Leaf, and Ford Mustang Mach-E. Instead, the Silicon Valley startup is staying at the luxury end, with numerous competitors from the likes of Audi, Mercedes, BMW, and the Rivian R1S.
While EV Competition Closes In, Tesla Still Reigns Supreme
Tesla has four of the top ten most EVs by registration, and only the Model 3 and Model Y have sold more than 30,000 units in the first three quarters of 2022. The second best-selling EV brand is Ford with the Mustang Mach-E claiming fifth place with 27,800 units sold as of September 2022. The rest of the top ten is the Chevrolet Bolt/Bolt EUV with 21,600 units, the Hyundai Ioniq5 and KIA EV6 with around 17,000-18,000 units, the Volkswagen ID.4 nearing 11,000 units, and the tenth-place Nissan Leaf, which just missed the 10,000 unit mark, according to data from S&P Global Mobility.
"Evaluating EV market performance requires looking through a lower-volume lens than with traditional ICE products," said Stephanie Brinley, associate director of AutoIntelligence for S&P Global Mobility, in the report. "But growth prospects for EV products are strong, investment is massive and the regulatory environment in the US and globally suggests that these are the solution for the future." Essentially, the conditions are right for EVs to surge in popularity, but future models will probably focus on a "quality over quantity" philosophy. So, do not expect an EV equivalent to the KIA Rio anytime soon.
The electric truck market is a massive sector Tesla is missing out on entirely. The borderline mythical Cybertruck is expected to finally reach the market sometime in 2023, but we wouldn't hold out breath. Even if it does at some point actually exist, it will be facing stiff competition from the F-150 lightning, GMC Hummer, and upcoming electric Chevrolet Silverado. While Tesla remains king of the EV game, that is getting harder and harder by the year.