Contributing Author: Craig Fitzgerald
A few weeks ago, I had to update a story on the crossover SUVs with the best fuel mileage. The story was written in 2019, and it was comprised of the usual suspects: Honda CR-V, Mazda CX-3, Ford Escape, exactly what you’d expect in the sea of sameness that is the crossover market. But something odd happened with the update. Every single vehicle on that list of 10 was replaced by a vehicle that didn’t exist in 2019, all powered in some way by electricity. Eight of the ten vehicles were pure battery electric vehicles. The other two were plug-in hybrids. There wasn’t a solely gas-powered vehicle that came within 30 MPG of achieving a spot on that list.
That’s the tsunami of products that’s about to crash on the beach that Tesla currently occupies, a brand that went from zero to more than 300,000 cars a year in just nine model years. There’s absolutely no question that over the last nine years, Tesla has pulled off at least three feats that were considered impossible as late as 2012: First, it was an all-new, independent auto manufacturer, something that really hadn’t been a thing in this country since AMC was consumed by Chrysler in 1987. Second, it convinced a measurable number of Americans to switch from internal combustion engines to electric power. Finally, it changed the way those cars were sold, cutting out the middleman and selling directly to the public.
But the competition is coming from every corner over the next few years. Can Tesla retain its market share?
How Successful is Tesla?
We’re not going to get into Tesla’s market cap. Explaining how Tesla can have a market value equal to Toyota, Disney, Coca-Cola, Verizon and Comcast combined is something somebody else needs to explain. We’re car people, not stock people.
In terms of sales, Tesla currently holds a 2.02% share of the automotive retail market in the United States. That puts it in the same territory as Mazda (2.19%), Daimler AG (2.2%), and BMW AG (2.4%).
Tesla’s best-selling models – the Model 3 and the Model Y – make up most of Tesla’s annual sales. The success of those two models seems to have been at the expense of the Model S, which has seen sales drop from a high of 29,491 in 2016 to just 11,555 in 2021.
How Successful are Traditional Auto Manufacturers?
That zero to 300,000-unit growth in nine years is what makes Tesla such a factor. But where’s the rest of the market?
Toyota still sells as many Camrys in a year as Tesla sells entirely. And Camry sales have fallen as traditional consumers have drifted from sedans to crossovers. Every year, 407,000 consumers buy RAV4s, for example. Another 361,000 buy CR-Vs. And those aren’t close to the sales leaders. Ford sells 726,000 F-Series trucks like clockwork every year.
But traditional auto manufacturers have not been able to crack the code on EV sales. Yet. Up until 2019, the top-selling EV in the U.S. that wasn’t a Tesla was the Nissan Leaf. The Leaf is a fine little car, but it really comes from another era. The Leaf was developed when traditional auto manufacturers built EVs under great duress. They put the technology in a car as small and cheap as possible, erroneously assuming that the only people interested in buying EVs were the same kinds of people who bought fuel-efficient cars in the past.
Tesla changed that by ONLY offering an EV in a premium automobile. It turned the market on its head almost instantly, and it’s taken manufacturers a decade to figure it out.
The popular analogy with companies like Ford and General Motors is that it’s like changing directions in an aircraft carrier, and that’s what’s gone on over the last ten years. GM experimented with cars like the Volt, Bolt, and Cadillac ELR. Ford messed around electrifying existing products.
But now, in 2022, traditional manufacturers have successfully turned the ship. They’ve developed clean-sheet designs, with range greater than 250 miles, in vehicles that can legitimately expect a premium customer. The Ford Mustang Mach-E sold 27,000 units in its first year and is on pace to beat that in 2022. The Volkswagen ID.4 came from nowhere and managed to sell 16,000 cars last year. The Bolt EV and Bolt EUV sold 24,000 units.
GM alone appears to be on the march, with the upcoming Hummer EV and Cadillac Lyriq sharing a platform, and pushing electric vehicles into the realms of off-road performance and traditional American luxury.
Even more exciting for 2022 are cars like the Kia EV6 and Hyundai Ioniq 5. These cars aren’t simply electrifying existing platforms. These are cars that were designed as EVs from the platform up, in a package that doesn’t require a seven-figure annual income to afford.
Where Will Sales Come From?
There is a finite number of Americans that will purchase a new car every year. In recent decades, that number has been around 17 million. Recessions and pandemics have put a damper on it, but that’s the number the industry strives toward every year.
Sales of new models have to come from somewhere. If you look at Tesla Model S sales in its peak years of 2017 and 2018, you can see exactly where those sales came from: The Audi A8, BMW 7 Series, and Mercedes-Benz S-Class. A8 sales dropped by half between 2013 and 2017. 7 Series dropped by a third. S-Class by 10,000 units a year, a 41 percent drop.
Of course, part of those sales may have gone to other premium brands, or SUV models within that brand, but a lot of them went to Tesla, with an entirely new product.
What Does This Mean For Tesla?
As traditional auto manufacturers emerge with products backed by long warranties, established dealer network,s and exceptional quality practices, they’ll begin to strip sales away from Tesla. It’s already happening. That doesn’t mean Tesla is going anywhere. It will remain successful among a certain breed of automotive consumers.
But Americans are still loyal to brands. The most recent J.D.Power consumer loyalty study suggests that 61 percent of American Subaru owners bought another car from that brand in 2021. Toyota, Honda, RAM and Ford all enjoy similar brand loyalty.
Tesla has its brand fanatics, but at the moment, nearly 98 percent of Americans are driving some other product, and we can expect more than half of them to at least consider a pitch from the provider of their current car.
Craig Fitzgerald began his automotive writing career in 1996, at AutoSite.com, one of the first online resources for car buyers. Over the years, he’s written for the Boston Globe, Forbes, and Hagerty. For seven years, he was the editor at Hemmings Sports & Exotic Car, and today, he’s the automotive editor at Drive magazine. He’s dad to a son and daughter, and plays rude guitar in a garage band in Worcester, Massachusetts.