Tesla is likely to retain its global number one battery electric vehicle (BEV) sales spot for at least another 18 months as legacy automakers struggle to sell a meaningful share of BEVs in 2022 and 2023 according to a new report on the global EV sector by research firm Bloomberg Intelligence (BI).
The report, Battery Electric Vehicles Report – Automakers Race to the Top found the profit incentive to catch up with Tesla was lacking for most traditional marques in the short term amid rising battery costs and a lack of scale, except for Volkswagen.
The German automaker was on track to overtake Tesla’s BEV volume in 2024 as global BEV demand was set to more than double out to 2025. Analysis showed China’s BYD ranking third for BEV sales globally in 2025 followed by a glut of legacy automakers languishing around the one million annual BEV sales mark. It was not until later in the decade that US and Japanese automakers would be serious challengers for a top three spot.
In a bid to challenge Tesla’s US$686 billion dollar market cap – which is almost double that of all US and EU legacy automakers combined – the report highlighted legacy automakers were unlikely to succeed in divesting BEV-related assets that were intertwined with their combustion operations and whose cash flows are paying for the transition.
Volkswagen was the exception and on track to launch an IPO of its Porsche brand in 4Q. Given the company’s potential 30% BEV sales mix in 2023 and about 45% in 2025, it was significantly ahead of peers and could attract a luxury based EUR85 billion valuation for the IPO and, possibly, an even higher tech-oriented valuation, according to the report.
“Looking ahead, automakers in Europe, China and elsewhere will continue to challenge Tesla via an impending wave of new models, though profit incentives are limited amid rising battery costs and a lack of scale. That may change in 2025-26 as more brands achieve critical mass on new-generation models with proprietary software. There are a number of challenging external factors to consider and bold BEV ambitions have done little to prevent crisis-level valuation multiples, stoked by recession fears, rising interest rates, supply-chain constraints and inflation,” said Michael Dean at Bloomberg Intelligence.
Battery prices remain critical to the cost competitiveness of BEVs and Volkswagen is investing up to EUR30 billion in the supply chain, including the opening of six new battery cell plants in Europe by 2030. Swedish battery developer Northvolt starts production on premium cells for it in 2023 while Audi’s midsize Q4 BEV SUV already had a similar margin to its internal-combustion-engine counterpart, the Q3.
“China’s carrot-and-stick approach to stoking EV sales could push battery-electrics to account for 25% of all passenger vehicle purchases by 2025. Sales in China have surged since the launch of the country’s new energy vehicle credit program despite erratic component supply,” said BI’s Steve Man.
Volkswagen, BMW and other foreign brands’ sales in China might come at the expense of pricing and profitability, having ceded first-mover advantage to Tesla and local makers. BYD, Nio, Xpeng and other local firms were rapidly closing the technology and branding gaps, wooing consumers not only with driving range and power, but also lower prices, luxury trim and even virtual reality entertainment.
“Ford is set to spin the electric vehicle narrative away from Tesla with the F-150 Lightning getting an early – and year-long – jump on the competition and making Ford the first automaker to ramp up production of a full-size battery-only pickup truck. General Motors and Tesla won’t compete in the space before 2023 and Rivian’s small scale makes it unthreatening,” said BI’s Kevin Tynan.
“Japanese automakers are crafting their electrified vehicle strategies with comprehensive offerings to meet the requirements of different markets. The industry is poised to accelerate electrification efforts, leveraging expertise gained from hybrids, which now dominate their domestic market, to compete, including in battery electric vehicles,” said BI’s Tatsuo Yoshida.