Is the Decline of Tesla Imminent?
By Juan Blancas
Since 2008 Tesla has always stayed ahead over traditional automakers for many reasons. In 2009 then vice chairman of General Motors, Bob Lutz, said Tesla was “headed for the graveyard” and thought of Tesla as another EV startup that would lack both innovation and funding and would subsequently die off in only a few months, or a year or two at best. Their first production car, the Roadster, was based off an old Lotus Elise chassis and barely managed 120 miles per charge. It was too expensive and impractical. To be frank, you would not blame Lutz for his prediction. However, he was proven drastically wrong when Tesla firmly established themselves as a major player in the auto industry with the launch of the Tesla Model S in 2012, the first successful electric sedan offered to the masses. Desirable, affordable and with more than enough range it was the perfect step forward for the brand and gave a bloody nose to many legacy automakers.
The Model S was quite simply a warning to traditional automakers, even to often less premium, mass-market manufacturers such as Volkswagen, Nissan and GM. These companies did not worry at the time because they had their own electric offerings such as the VW e-Golf (in development since 2011), Nissan had the Leaf (which was selling strongly) and GM had the Chevy Volt (albeit only a plug-in). However, whilst Tesla continued to develop and improve, legacy automakers often stuck with a sole electric offering for much of the 2010s. This neglect of innovation proved to be a mistake in the following years with the decline of combustion engines, which was further aided by various scandals such as Diesel Gate. As time progressed many automakers scrambled to challenge Tesla and take back market share such as BMW with the i3 (launched in 2013) and and Audi with the introduction of the e-tron lineup.
These attempts however have not been successful enough to compete with Tesla. Yes, the likes of the Audi e -tron are selling well in select markets like Norway, but globally Tesla remains top when it comes to EVs. By the end of 2020 Tesla continued to remain top of its game in the electric car world with a remarkable 81% market share of the US EV market in the past year.
This year however, Tesla’s market sales dropped to 69% in February due to overdue impressive strides from traditional automakers. Mainly the introduction of the Ford Mustang Mach-E accounted for a drastic amount of Tesla’s market share loss this year. Tech-laden, affordable, practical and desirable, the Mach-E is the very definition of a ‘Tesla-killer’. At time of writing, the Volkswagen ID.4 is just about to go on sale too. It will be around €15-20k less than a Model Y in Europe (even accounting for the reductions in costs caused by Giga Berlin), and will no doubt continue to eat at Tesla’s global market share. Many reckon the ID.4 could be the world’s best-selling EV this year, ahead of VW’s smaller ID.3 hatchback that’s restricted by only being available in Europe. There’s also the likes of the Nissan Ariya and Hyundai Ioniq 5, both have ample range, plenty of tech and will be significantly cheaper than any Tesla sold in Europe. In the US, where EV sales rose to 34% this past year, things might be more close. Tesla’s prices remain low there, and people tend to trust the brand more.
But with continued investment from legacy automakers, how long will that dominance last? As we can see, Tesla are already beginning to lose the European market to the likes of the VW Group’s ID.3 hatchback and Audi e-tron. Legacy automakers are continuously making advancements in the EV game and slowing sales in Europe could indicate the gradual decline of Tesla. But will Elon Musk’s firm suddenly vanish into thin air? Of course not. A likely scenario is that they will attempt to market themselves as a premium brand, and set their sites on the likes of BMW and Mercedes (firms who sell around 2 million cars a year) versus the likes of Volkswagen and Ford (firms who sell 10 million cars a year). This would still be a challenge, as Tesla sold 499,950 cars last year. But with the likes of the ‘$25k Tesla’ (most likely an ID.3-rivaling hatchback), the Cybertruck and the Semi all on the way, coupled with the new Giga Austin and Berlin factories, they could get there. But will they ever reach the 8-10 million+ annual sales of VW? Highly unlikely.
But what do you guys think the future of Tesla will look like? Do you ever think they’ll reach the levels of Volkswagen, Toyota, Hyundai or Ford? Let us know your thoughts in the replies section below!
What about Porsche? The Taycan is really hitting Tesla hard. What I also think is that while Tesla turning into a premium brand like BMW or Mercedes is likely, I think they’ll stay at some extent to produce cars like VW group. That they’ll fall somewhere between 2-10 million cars an year with new models released by Tesla, and with that balance slightly tilting towards 10 million cars an year. I see that Tesla becomes a new legacy EV brand and that at times, it would overtake the likes of VW and Ford.
I don’t think we’ll get a clear view of Tesla’s market position in Europe until the Giga Berlin factory is completed and ramped up.