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A leader under pressure from competitors. How Tesla's market position has changed over the past year
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The core of Elon Musk's business empire, Tesla Corporation, is facing problems that are causing the billionaire to lose his fortune and investor confidence. Just a year ago, there was no one to challenge the title of the world market leader in electric vehicles, and its capitalization reached $ 1.2 trillion, but now Tesla is luring buyers with discounts and fighting off competitors breathing in the back of the head.
New old tactics
In the final weeks of 2022, Tesla has resorted to the tried and true tactic of automakers selling off last year's models, according to The Wall Street Journal. The company offered a $7,500 rebate in the US but fell short of its 50% annualized sales growth target. Tesla recently cut prices across its entire lineup in the US by up to 20% to compete for consumer tax breaks.
But problems are piling up. Because of this, many Tesla shareholders are outraged, who believe that Musk was too keen on Twitter. In 2022, the capitalization of the electric car company sank by almost 70% compared to the peak in November 2021. In absolute terms, it fell by $850 billion, while Musk's estimated fortune fell by more than $200 billion.
Clouds are now gathering over Tesla's key Chinese market. Tesla has a factory in Shanghai that produces the most popular Tesla models (Model Y and Model 3), but due to low demand, the company also resorted to discounts. Sources familiar with the matter claim that at the end of 2022, she also curtailed part of her plans to purchase batteries for the current year.
The drop in sales is due to growing competition from local manufacturers, especially the giant BYD, which has its own battery capacities, with its widest range of models for every taste. “Tesla doesn’t quite understand what Chinese customers want,” says Andy Ahn, CEO of Zhejiang Geely Holding Group (electric car maker Zeekr). According to him, Tesla lacks the premium class, which is of interest to Chinese consumers.
Hollywood stories
The WSJ notes that Tesla's competitors in the US are actively leveraging its own ramp-up experience: attracting customers with new models, strengthening control over supply chains, and investing in digital services. Something reminiscent of Tesla, the electric Ford Mustang in sales . overtakes the ICE sports car of the same name
Ford paid a lot of attention last year to the release of an electric version of the F-150 pickup truck, overtaking the serial Cybertruck promised by Tesla for many years. “I’m very convinced that the only way to do this [electric car manufacturing] is not to go straight for Tesla,” said Ford CEO Jim Farley. “We have to move on to segments where we are really good, like the F-150 or maybe real SUVs or vans.”
The California startup Rivian was the first to enter the consumer market with an electric pickup truck. When his R1T rolled off the assembly line at the Normal, Illinois plant in September 2021, CEO and founder Arj Scaringe enthusiastically showed off a photo of workers welcoming several electric cars onto the assembly line.
Many players, among other things, poached talent from Tesla, the publication continues. So, one of its lead engineers, Alan Clark, who participated in the development of the Model S, Model X and Roadster, has been with the Ford team since the beginning of 2022. "Hollywood doesn't make films about winning teams," Clark says of his reason for joining Ford. “They make films about teams that get left behind and then miraculously come back.”
In December, as Tesla discounted its cars, Ford raised the price of the F-150 Lightning electric pickup for the third time in a year. The starting price for new orders is now 40% higher than the original price. A month ago, JD Power conducted a survey of potential EV buyers in the US, which showed that 37% are considering purchasing a model from Ford, 39% Tesla, and 44% Chevrolet (General Motors brand).
Tesla's copycat startups have surpassed it in some areas, such as the Lucid Group. Under the direction of Peter Rawlinson (a former Tesla engineer developed who also the Model S), she released a luxury electric car that managed to drive 516 miles (about 830 km) on a single charge. For comparison, the result of the Model S is 405 miles. As the WSJ points out, mileage per charge is one of the key criteria when buying an EV.
Fast, bright, affordable
When electric vehicles were gaining popularity on calls for environmental protection, the first examples - for example, the Nissan Leaf and Chevrolet Bolt - showed modest results. Elon Musk made a bet on fast, bright and luxury cars powered by batteries, and ultimately released a line available to a wide range of consumers.
Investors bought. According to FactSet, cited by the WSJ, the level at which Tesla shares traded at the end of 2021 exceeded expected earnings by about 120 times. This ratio has since dropped to 24.
The hard-won success of Tesla's formula led to what has been called the biggest transformation of the American auto industry since Henry Ford's assembly line. Automotive companies and their subcontractors have pledged to spend more than $525 billion by 2026 on the transition to electric traction, according to Alix Partners, a consulting firm.
Now, while the industry is gushing with new products, Musk seems to be focused on something else. In February 2021, the company hit the crypt and purchased bitcoins for $ 1.5 billion. Musk, commenting on the surprise of Binance CEO Changpeng Zha that Tesla invested in bitcoin, and not in the Dogecoin project, emphasized that its actions do not directly reflect the views of the businessman , called the purchase "quite adventurous" and indicated that he was an engineer, not an investor.
Later, Musk officially appointed himself the “techno-king” of Tesla (Technoking), as follows from the document sent to the SEC, however, after some time, the billionaire justified himself that this was a joke to increase sales of electric vehicles. But recently, instead of a new car, Musk introduced a prototype humanoid robot Optimus for $ 20,000. And Tesla began deliveries of electric trucks three years later than planned.
Meanwhile, Tesla reference models have begun to show their age. The line-up was justified during the pandemic, when supply chain disruptions kept customers waiting for months for their electric car, even though the rate shocked Wall Street back then. But a year ago, Musk said that in 2022 he will focus on increasing production, rather than expanding the lineup.
What now
Tesla retains the undisputed leadership in the world both in the production of electric vehicles and in terms of capitalization among automotive companies. It has a well-established supply chain, experience in scaling production with cost reduction, as well as an extensive network of its own "fast" charging stations.
Tesla's share of the U.S. EV market has fallen from about 72% to 65%, according to Motor Intelligence estimates cited by the WSJ. Ford is second with 7.6%. It is followed by Hyundai Motor and its subsidiary Kia, which together control 7.1% of the US electric car market.
By the end of 2022, Tesla sales amounted to 1.3 million cars worldwide, growth slowed to 40% from 87% in 2021. According to corporate forecasts, GM or Ford may not surpass this level until 2025 at the earliest.
But most importantly, Tesla is profitable, while its key competitors in the US are losing money on every electric car sold. The company's operating margin topped 17% in the third quarter, compared with GM's 8.1% and Ford's 1.5%, according to FactSet. Rivian and Lucid operate without profit.
“Tesla is very good, but everyone is now showing their strengths,” warns Andy An, head of Zhejiang Geely Holding Group. In his opinion, Tesla is no longer the industry benchmark it used to be.
Tesla did not respond to a WSJ request for comment. Musk attributed the decline in sales and stocks to high interest rates and assured that he remains attentive to the company. He sees its long-term fundamentals as "extremely strong" and its driver-assistance package, which users tend to think of as autopilot, as a strategic advantage.