New EV entries nibbling away at Tesla EV share

Although U.S. electric vehicle registrations remain dominated by
Tesla, the brand is showing the expected signs of shedding market
share as more entrants arrive. Much of Tesla’s share loss is to EVs
available in a more accessible MSRP range – below $50,000, where
Tesla does not yet truly compete.

Regardless of brand or price point, early S&P Global
Mobility data suggests consumers moving to electric vehicles in
2022 are largely doing so from Toyota and Honda – brands which have
been unable to keep their internal combustion owners loyal until
their own brands begin to participate more significantly in the EV
transition.

While both Japanese companies built a US legacy with phenomenal
fuel economy and powertrain technologies – including
electrification through hybrids, plug-in hybrids and fuel-cell
electric vehicles – both have been caught flat-footed in the
context of 2022. S&P Global Mobility conquest data for Tesla’s
Model 3 and Y, Ford Mustang Mach-E, Hyundai Ioniq5, and Chevrolet
Bolt show strong captures of buyers from the two leading Japanese
brands.

Tesla’s challenge

So far, most EVs continue to be acquired for higher MSRPs and by
buyers with higher incomes than the demographic profile for total
light vehicle registrations–in part because most EVs are
Teslas.

Of more than 525,000 EVs registered over the first nine months
of 2022, nearly 340,000 were Teslas. The remaining volume is
divided, very unevenly, among 46 other nameplates. However, the
trends may change as the number of EV buyers becomes more
robust.

Tesla’s position is changing as new, more affordable options
arrive, offering equal or better technology and production build.
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 Global Mobility predicts the number of battery-electric
nameplates will grow from 48 at present to 159 by the end of 2025,
at a pace faster than Tesla will be able to add factories. Tesla’s
CEO Elon Musk confirmed (again) during a recent earnings call that
the company is working on a vehicle priced lower than the Model 3,
though market launch timing is unclear.

Tesla’s model range is expected to grow to include Cybertruck in
2023 and eventually a Roadster, but largely the Tesla model lineup
in 2025 will be the same models it offers today. (Tesla is also
planning to deliver a commercial semi-truck by the end of 2022, but
it would not be factored into light-vehicle registrations.)

“Before you feel too badly for Tesla, however, remember that the
brand will continue to see unit sales grow, even as share
declines,” said Stephanie Brinley, associate director,
AutoIntelligence for S&P Global Mobility. “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 has opened two new assembly plants in 2022 and is looking
for the site of its next North American plant. Tesla today is the
brand best equipped for taking advantage of the immediate surge in
EV demand, though manufacturing investments from other automakers
will erode this advantage sooner than later.

The competition

Throughout 2022, EVs have gained market share and consumer
attention. In an environment where vehicle sales are limited by
inventory and availability, EVs have gained 2.4 points of market
share year over year in registration data compiled through
September – reaching 5.2% of all light vehicle registrations –
according to S&P Global Mobility data.

The nascent stage of market growth leaves others competing for
volume at the lower end of the price spectrum. New EVs from
Hyundai, Kia and Volkswagen have joined Ford’s Mustang Mach-E,
Chevrolet Bolt (EV and EUV) and Nissan Leaf in the mainstream brand
space. Meanwhile, luxury EVs from Mercedes-Benz, BMW, Audi,
Polestar, Lucid, and Rivian – as well as big-ticket items like the
Ford F-150 Lightning, GMC Hummer, and Chevrolet Silverado EV – will
plague Tesla at the high end of the market.

With the Model Y and Model 3 combined taking 56% of EV
registrations, the other 46 vehicles are competing for scraps until
EVs cross the chasm into mainstream appeal. (A recent S&P
Global Mobility analysis showed the Heartland
states have yet to embrace electric vehicles.)

“Evaluating EV market performance requires looking through a
lower-volume lens than with traditional ICE products,” Brinley
said. “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.”

Production volumes today are restricted by factory capacity, the
semiconductor shortage and other supply chain challenges, as well
as consumer demand. But the issue of production capacity is being
addressed, as automakers, battery manufacturers and suppliers pour
billions into that side of the equation. Though there are many
signals suggesting consumer demand is high and that more buyers may
be willing to make the transition – and to do so faster than
anticipated even a year ago.

But consumer willingness to evolve to electrification remains
the largest wildcard. Looking past Model Y and Model 3, no single
model has achieved registrations above 30,000 units through the
first three quarters of 2022. The second-best-selling EV brand in
the US is Ford. However, Mach-E registrations of about 27,800 units
are about 8% of the volume Tesla has captured, according to S&P
Global Mobility data.

Tesla has four of the top five EV models by registration; in the
sixth through 10th positions are the Chevrolet Bolt and Bolt EUV,
Hyundai Ioniq5, Kia EV6, Volkswagen ID.4 and Nissan Leaf. Through
September, the Bolt has seen about 21,600 vehicles registered,
Hyundai and Kia are in the 17,000-18,000-unit range, and VW
approached 11,000 units. Including the tenth-place Leaf, no other
EV has had registrations above 10,000 units over the first nine
months of 2022.

That said, there are caveats. Volkswagen’s low volumes are
affected by supply chain snarls and market allocations to more
EV-friendly regions – issues Hyundai and Kia also face. However,
VW’s new ID.4 assembly line in Tennessee went live in October; the
automaker said at the plant opening that it had 20,000 unfilled
reservations and a plant capacity of 7,000 units per month.

That should change the EV volume picture significantly. A look
at the roughly 525,000 EVs registered over the first nine months of
2022 shows the EV market today remains in the hands of affluent
buyers, who are spending more on their vehicles than ICE
buyers.

While logic dictates that further growth will require more EVs
being offered in the $25,000-$40,000 price range, the willingness
of buyers to spend more today reflects an aspirational nature to
the choice.

Tesla’s EV-only strategy gives it a retention advantage – as few
EV owners have returned to ICE powertrains. But as new EVs arrive,
loyalty will be tested. Currently, the Model Y has a 60.5% -brand
loyalty and had nearly 74% of buyers come from outside the brand
(the conquest rate) – tops in the industry. Who is Tesla
conquesting from? Toyota, Honda, BMW and Mercedes-Benz. Toyota and
Honda are only beginning to get into the EV market, though have yet
to enter the fray in earnest.

Note: This chart reflects S&P Global Mobility North
American cumulative sales forecast for BEVs 2022-2034.

The race to market

Honda owners in particular are showing an interest in electric
vehicles. Unfortunately for Honda, its first EV (a midsize SUV
shared with GM) isn’t expected until 2024, whereupon the second
half of this decade sees a flurry of activity. That still presents
the challenge of reconnecting with owners who have defected from
the Honda brand.

In its meteoric growth, Tesla has conquested Japanese icons: The
top five Model Y conquests are the Lexus RX, Honda CR-V, Toyota
RAV4, Honda Odyssey, and Honda Accord. Meanwhile, the top five
Model 3 conquests are the Honda Civic, Honda Accord, Toyota Camry,
Toyota RAV4 and Honda CR-V. So even though the overall market has
ditched sedans for SUVs, there remain some who prefer a sedan in
electrified form.

But it’s not just Tesla winning over consumers of the big two
Japanese brands. Early data of the 27,800 registrations of the Ford
Mustang Mach-E through September, shows similar conquest patterns:
The top Mach-E conquest model has been the Toyota RAV4 (regardless
of powertrain), followed by the Honda CR-V and Jeep Wrangler. The
Mach-E is also experiencing registrations at a lower MSRP range –
43% of registrations had an MSRP below $50,000. For Ford, more than
63% of registrations from January through September 2022 were
conquests from other brands.

After the Mustang Mach-E, the next top EV is the Chevrolet Bolt
(EUV and EV). The Bolt is likely to continue to gain ground, as it
spent most of the fall and winter of 2021-22 in production hiatus
as Chevrolet resolved a warranty issue, and then saw a price
reduction soon after production re-started. With production back
online, a more attractive price, and GM’s plans to increase Bolt
capacity in 2023, the vehicle has potential to keep growing. The
Bolt also sees RAV4, CR-V and Prius as its top three conquest
models.

And while the Hyundai Ioniq5 is limited in its geographic
distribution (and faces similar capacity and global demand issues
as VW ID.4), S&P Global Mobility conquest data show most Ioniq5
buyers previously owned a Toyota RAV4, Honda CR-V, Mazda CX-5 or
Subaru Forester. Of the top 10 Ioniq5 conquests, only two are from
the traditional Detroit Three brands, with the Chevrolet Bolt at
seventh and Jeep Wrangler at tenth.

Of course, the high conquest rates from Toyota and Honda come
from the historical sales success of those models overall. The RAV4
is the best-selling non-pickup truck in the US, which means there
are more RAV4 buyers to conquest. The Camry, Accord, and CR-V
follow close behind.

Along this path, however, these EVs are seeing little conquest
of the F-Series or Chevrolet Silverado pickup truck. In the S&P
Global Mobility garage mate data, however, we see a strong F-Series
representation. It shows up as a top garage mate for the Mustang
Mach-E; the Bolt does see the Silverado as its top garage mate, the
F-Series is next. F-Series is also the top garage mate for the
Ioniq5, EV6 and ID.4.

“Though today’s EV buyers are not giving up their pickups in
favor of going electric, it also suggests that there is a pool of
EV owners, who are also full-size pickup owners, being created,”
Brinley said. “We know that EV owners tend to be loyal to EV
propulsion. This intersection can provide support for EV pickup
adoption.”

An existing pool of current EV owners who also have pickups can
be a benefit for the efforts in the full-size EV pick-up space,
particularly for the Ford F-150 Lightning, Chevrolet Silverado EV
and GMC Sierra EV, each of which is aimed at a traditional pick-up
use case and owner. The Rivian R1T, GMC Hummer EV and Tesla
Cybertruck each occupy a lifestyle pickup space, geared toward
innovator buyers and statement-makers, and could be more likely to
conquest buyers to the pickup segment as well as to an EV purchase.
But for now, electric vehicles remain the provenance of sedans and
small SUVs.

NOTE: All loyalty data is based on the S&P Global
Mobility household loyalty methodology, which may indicate an
addition to the garage and not necessarily a disposal.

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This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.