Tesla's US Dominance in EVs Slips

Tesla Inc. dominance of the U.S. electric vehicle (EV) market as more brands sell cheaper options.

Elon Musk's company accounted for 65% of 525,000 EVs registered in the first nine months of 2022, according to S&P Global Mobility. That market share is down from 71% last year and 79% in 2020 and could slide to just 20% by 2025.

“Tesla's position is changing as new, more affordable options arrive, offering equal or better technology and production build,” S&P said in the report. “Given that consumer choice and consumer interest in EVs are growing, Tesla's ability to retain a dominant market share will be challenged going forward.”

S&P expects there to be 159 electric vehicle brands by the end of 2025, more than triple today's 48. Tesla’s lineup by then will largely resemble today's as rivals break into the market faster.

EV sales are growing rapidly in the U.S., although they make up a small percentage of the total auto market. In the first three quarters of 2022, 5.1% of all vehicles registered in the U.S. were EVs, up from 2.8% in the same period a year earlier.

Tesla's largest lead is in the luxury vehicle market, where it makes up 86% of registrations. It struggles to capture mid-market demand, however, because it doesn't offer many vehicles under $50,000. New EVs in 2022 offering choices in that market include vehicles from Hyundai Motor Co., Kia Corp. and Volkswagen Group, joining the Ford Mustang Mach-E, the Chevrolet Bolt EV, and the Nissan Leaf.

Ford Motor Co. is Tesla's biggest competitor, holding 7% of registered EVs in 2022 and 28% of the non-luxury EVs. The Mach-E is the only non-Tesla car to be in the top 5 EV models by registration.

Tesla's inability to adapt to new competition in the marketplace has hurt it in other ways. While the company has long been the biggest customer in the market for lithium, Ford and General Motors have begun striking deals with prospective suppliers to pay upfront. Tesla, which has long resisted forming partnerships with suppliers, is seeing its lead in lithium evaporate.

Even as shares in the marketplace decline, Tesla will continue to see growth in unit sales.

"Before you feel too badly for Tesla, however, remember that the brand will continue to see unit sales grow, even as share declines," Associate Director, AutoIntelligence for S&P Global Mobility Stephanie Brinley said in the report. "The EV market in 2022 is a Tesla market, and it will continue to be, so long as its competitors are bound by production capacity."

Tesla’s priority now is to work on a more affordable Model 3 that may allow it to break into the cheaper markets, as the Model 3 currently costs just under $50,000, although shipping fees raise this price. However, no announcement has been made on what the new price will be.

Tesla’s stock has fallen 54% in the last 12 months, outstripping a 30% drop in the Nasdaq Composite.