Tesla's planned lower-priced BEV, the so-called Model 2, will sell 1mn units/yr by the end of the decade and will keep Elon Musk's automaker at the forefront of the auto industry and help stave off competition from Chinese rival BYD, according to automotive analysts at consultancy Bloomberg NEF (BNEF).
After much noise about BYD outselling Tesla on BEVs in the fourth quarter of 2023, BNEF not only projects that Tesla will regain the top spot in terms sales in the near-term, but also that the highly anticipated next generation compact Tesla will cement unprecedented growth for the US OEM in the longer term.
"We believe that Tesla will continue to dominate the market,” says Steve Man, BNEF lead North American automotive analyst.
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Man and his colleagues believe that Tesla's falling behind BYD's Q4 sales was the result of non-repeating delays within Tesla associated with the launch of the upgraded Model 3 in the US and China. But they also concludes that BYD as yet lacks the global reach and presence in key markets to sustain its top position.
“There has been a lot of media attention surrounding this, with BYD ‘overtaking’ Tesla in the fourth quarter, but we still believe that Tesla will dominate for a couple of reasons," says Man.
"They have a global reach. And it is not just any global reach; they are present in the three largest auto markets in the world, and over the last ten years they have been developing and refining their vehicles and that has been resonating with the consumer.
"They sold 1.8mn cars last year and that is significant. That still sends a message to the market that they ae a serious contender,” he continues.
According to Joanna Chen, BNEF China automotive analyst, the question of global BEV leadership revolves around whether or not BYD outselling Tesla is repeatable. Again, in her view, "the fourth quarter was a special quarter because Tesla was transitioning to its new Model 3 during the quarter", which created a temporary opportunity for BYD to take the top spot.
But these projections of future Tesla leadership rest significantly on the success of the ramp up of the Model 2 — which could capture vast swathes of market share by being the first EV model aiming to combine a c.$30,000 price tag with the brand recognition that Tesla can boast.
“The issue is that (Tesla) lacks the range of products. Cybertruck is cool, depending on who you ask, but I think it is more of a showpiece for them," says Man.
"What we need to keep an eye on is really their next vehicle, which is a compact vehicle they have dubbed the Model 2. This could be a 1mn unit sales vehicle on an annual basis and could lead to a step function in the growth trajectory," he continues.
Another factor in Tesla's continuing competitiveness in BNEF's projections is the expectation that its price cuts will continue into 2024, as the firm reacts to BEV markets in the US and Europe experiencing slower growth than seen in the last three years.
“On the EV side, we are looking for 2024 to be around 1.2mn units [in the US], up by 9pc. That is much slower growth than we saw in the past and much slower growth definitely than we are seeing in China,” Man says.
And it is is a similar forecast on the other side of the Atlantic. “We see BEV market share flattening to about 16pc in Europe in 2024, rising more towards the end of the decade, which is when we will see the next generation of platforms pushing through,” says BNEF lead auto analyst Mike Dean.
“We do expect discounting to increase this year to improve the affordability of these vehicles for the consumer,” Man continues. But while Tesla might be well-placed through its margin cushion to outcompete Western rivals on price, it will likely not be be able to rely on price cuts to improve its squeezed position in China.
One of the key factors giving OEMs the headroom for discounts will be reductions in battery prices, BNEF predicts. And Chinese actors, including the vertically integrated BYD, will be just as well-placed to benefit at home — while Tesla will even be largely hamstrung by regulation on passing on these savings in the US.
“Battery costs are coming down but I do not think the US is going to benefit from that because of the IRA," Man predicts.
Ciaran has written about finance, politics and culture. He is passionate about e-mobility and what it means for our way of life.
Ciaran has a Masters in Ancient Philosophy from Oxford University.
