Is Tesla’s big miss part of an overall EV retreat?
Not exactly, but Tesla is toast alright
Tesla reported an almost 9% decline in Q1 units sold, globally, compared with 1Q sales volumes a year ago. One of the big questions that many are asking is naturally: Is this part of an overall EV sales decline?
EV growth rates are slowing to be sure, but unlike Tesla they have not (yet) turned into negative growth. The number of EV models -- and in the case of China, entire new EV brands -- is growing dramatically. The number of EV models is now so large that it’s impossible to keep track. We are in the several hundreds, globally, racing to a thousand.
If you are living in the US and not traveling to Europe and Asia much, then you have not seen much of this. Most of the new models (and brands) are taking market share in Asia and Europe, not the US or Canada. If you are living in the US, you may continue to believe Tesla has a huge share of the EV market.
Tesla does have a huge -- but rapidly declining -- share of the US EV market, but this is not so outside North America. In Europe and Asia overall, Tesla’s EV market share is already low and falling quickly.
Who is taking market share, then? Almost everybody, that’s who. On the one hand, it’s the traditional automakers such as Peugeot, Ford and Hyundai. On the other hand, it’s all the new Chinese brands such as Hongqi, Zeeker and MG.
This is an impossible situation for Tesla: The EV market overall is growing at a healthy clip, but not fast enough to absorb all these new models and brands. Something has to give, and in a first instance that means Tesla losing market share. In the second instance, it means Tesla’s unit sales actually falling.
That’s where we are now. Tesla’s unit sales peaked just under 500,000 units per quarter, and now they’re under 400,000 and falling. Keep in mind that this happened during a time when Tesla had been cutting prices incessantly, by an estimated 20% or so. Economically, it has been a catastrophe with falling margins -- and we may not have seen the last of those falling margins. Tesla will reveal the next chapter of this horror movie on April 23, and then in the 10Q that is typically filed within a week thereafter.
The artificial EV market
In an undisturbed free market, where automakers did not have any mandates to sell a certain (and increasing) mix of EVs, and where there are no subsidies or penalties skewing the market, I have said for many years that EVs would be closer to 0.1% of the market than 1.0%. EVs just aren’t a better solution for the vast majority of people: They weigh more, cost more, eat up more tires, cost more to insure, cost more to repair, have horrible resale value, and have inconvenient ranges and recharging times. All in all, those disadvantages don’t come close to making up for the fact that EVs are a bit smoother to drive: Regular gasoline cars are smooth enough for almost everyone.
Learn the Chinese EV market
Most Americans have no clue how fast the Chinese automakers are advancing. I recommend that every US investor start learning by watching the Wheelsboy YouTube channel, which reviews all the Chinese cars that are not (yet) available in the US. Here is a recent example:
Tesla’s impossible situation
Tesla is a wildebeest on the African savanna caught between multiple groups of predators:
A pack of hyenas
A lion pride
For good measure, a few crocodiles
You know how this movie ends. The wildebeest is torn to shreds. In Tesla’s case, the predators are:
All the new Chinese brands
All the existing gasoline-focused automakers
Tesla is in the process of meeting the same fate as that lone wildebeest on the African savanna who encounters a pack of hyenas, a lion pride and a few crocodiles all at the same time. I would hesitate to set a nice round $0 price target on Tesla, but it sure is tempting.