Tesla's EV Market Share Is Low And Falling

Summary

• What have you, the investor, assumed for Tesla’s EV market share? Both globally, and in Europe? You are about to find out the real numbers.
• Investors who are shown Tesla’s EV market share numbers globally and in Europe are surprised at how low they are.
• Just as bad -- for a “growth company” anyway -- is that Tesla’s EV market shares globally and in Europe have been falling recently.
• Tesla’s Model 3 EV market share in Europe is particularly bad: In three out of the last four months, it has ranged between 2% and 8%.
• The cause of these low and falling market share numbers for Tesla is simple: An onslaught of new competition in early 2020.  I list twelve new models taking share from Tesla.

NOTE: A version of this article was first published on or about May 29, 2020, on my Seeking Alpha Marketplace site.

One of the greatest myths behind Tesla’s (TSLA) outsized valuation is that it has some sort of dominant market share in electric vehicles (EVs). That’s the segment of the automotive market where the vehicle is equipped with an electric plug.

The problem with this myth is that it doesn’t actually stand up to the facts. As it turns out, Tesla’s market share in EVs isn’t all that large -- well under 20% in most quarters -- and it’s not rising either. Actually, here in 2020 thus far it looks like it is falling, with three out of the four months thus far seeing lower Tesla EV market share than we have seen in a long while.

In this article, I present the data in two buckets:

1. Global EV unit sales -- vs Model 3 and total Tesla sales.
2. European EV unit sales -- vs Model 3 sales.

Why am I adding Europe specifically? Because it is the geography which saw a huge increase in competition resulting from the legislation that went into effect on January 1, 2020. This makes this a particularly interesting time to see what kind of impact this increase in competition has, on Tesla’s market share.

Let’s start by looking at global EV unit market share:

Data source: EV Sales

EV definition: Every car with an electric plug = Battery-Electric Vehicle (BEV) + Plug-In hybrid (PHEV)

As you can see in the table above, the Model 3 makes up almost all of Tesla’s sales since the beginning of 2019. For that reason, the two trend lines are almost identical -- total Tesla market share, and Model 3 market share.

Tesla's sales pattern is well-known at this point: It delivers at least half of its unit sales in the third month of every quarter. Other automakers do not have nearly that extreme back-end loading of their quarters, so Tesla’s market share spikes in that third month of every quarter.

That said, look at 2020 thus far: In three of the first four months of 2020, Tesla achieved a top market share of 14%, and the lowest was 8%. That is not a good trend for an alleged growth company that is awarded a dramatic growth premium in the stock market. Low and falling market share is not a typical attribute of a premium valuation.

One thing of note: Tesla started selling the Model 3 in Europe and China basically in February-March 2019. For that reason, year-over-year comparisons make Q1 2020 look better for Tesla than a fair number would otherwise suggest.

Let’s move to Europe, which saw the new competition enter the market as a result of the new CO2 legislation that went into effect on January 1, 2020:

Data source: EV Sales

EV definition: Every car with an electric plug = Battery-Electric Vehicle (BEV) + Plug-In hybrid (PHEV)

As you can see in the table above, Europe looks even worse for Tesla than the global picture. Note that for Europe, we only have this good data for the Model 3. The main reason for that is that the Model X and S rarely end up on the European top-20 sales chart for all but the increasingly rare months anymore.

So far in 2020, Tesla’s Model 3 market share in Europe has ranged between 2% and 8% for three out of the four months of the year. We will soon get May month numbers, and here is my preview: It will be an extremely low number for Tesla in Europe.

As with the global numbers, keep in mind that Tesla didn’t start selling the Model 3 in Europe until February or March 2019, depending on the country. That makes the Q1 2020 comparison from a year prior, seem too good for Tesla.

Why is Tesla’s market share so low and falling?

In a word or two, new competition. U.S. investors are not seeing much of this, because so much of this new competition is happening outside the U.S., and in Europe perhaps more than any other place. Here are twelve examples of BEVs that are sold in Europe, taking market share from Tesla -- but that are not (yet) sold on U.S. soil in their current form:

• Renault Zoe
• Peugeot 208
• Opel Corsa
• Mercedes EQC
• Kia Soul
• MG ZS
• Volkswagen eUp
• Skoda Citigo
• DS 3
• Renault Kangoo
• Nissan EV-200
• Seat M2

Of course, not all of these are “direct competitors” with any Tesla models. However, for many people they are willing to cross-shop based on perceived quality, location of service centers, and so forth. Many people “just want an electric car” and are willing to cast a wide net. Perhaps they are replacing only one car out of two or three cars in the household, and in a multi-car arsenal, there are different suitable tools.

This is just the beginning. Competition will increase, every month going forward. That does not bode well for Tesla’s margins.

One final word about “low” market share: It can both be true that Tesla has the highest market share in EVs, and that its market share is still relatively low. In an industry where the market share leader has approximately 20% market share -- let alone less -- this player simply is not in the same league as the leading technology companies.

Leading technology companies often have 50% market share, or even dramatically higher. For example, Alphabet (GOOG) has very high market shares with its Chrome, Android and YouTube products. How much would you value Alphabet if it only had 10%-20% market share for each of those products, instead of 50% or more? This is one reason why Tesla should be valued like an automaker, not like a leading technology company such as Alphabet.

Get More Mileage Out Of Your Auto Investing

The auto industry moves fast, and it can be tough to stay on top of everything that's happening. I designed Auto Insight For Wall St. to keep you aware of all the changes without your needing to spend all the time. I attend new vehicle launches, press conferences, and industry events and share that insight with my subscribers. Looking for more? Sign up for a free trial today.

Disclosure: I am/we are short TSLA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: At the time of submitting this article for publication, the author was short TSLA. However, positions can change at any time. The author regularly attends press conferences, new vehicle launches and equivalent, hosted by most major automakers.