A Tesla Model 3 vehicle is on display at a Tesla dealership on September 22, 2022 in Santa Monica, California. Tesla is recalling over 1 million vehicles in the US because the windows can pinch a person’s fingers as they roll up.
Alison’s Dinner | Getty Images
Tesla is still the best-selling electric vehicle brand in the U.S., but its dominance is eroding as rivals offer a growing number of more affordable models, according to a report Tuesday from S&P Global Mobility.
The data firm found that Tesla’s market share of new electric vehicle registrations in the US was 65% in the third quarter, down from 71% last year and 79% in 2020. S&P predicts that Tesla’s market share for EVs will drop to less than 20% by 2025, with the number of EV models expected to grow from 48 today to 159 by then.
A decline in Tesla’s U.S. market share was expected, but the speed of the decline may be troubling for investors in Elon Musk’s auto and energy company. As Musk focuses his attention on fixing his recently acquired social media company Twitter, Tesla shares closed up about a point to $180 on Tuesday. Tesla shares are down for almost half a year so far.
S&P reported that Tesla is slowly losing its grip on the US EV market to all-electric models now available in price ranges below $50,000, where “Tesla is not yet truly competitive.” Tesla’s base Model 3 starts at about $48,200 with delivery charges, but the vehicles typically sell for higher prices with options.
“Tesla’s position is changing with the emergence of new, more affordable options offering equal or better technology and manufacturing,” the S&P report said. “Given that consumer choice and consumer interest in EVs is growing, Tesla’s ability to maintain a dominant market share will be questioned going forward.”
The new data follows a Reuters report on Monday that Tesla is developing a facelifted version of its entry-level Model 3 aimed at cutting production costs and reducing components and interior complexity.
During the company’s third-quarter earnings call in October, Musk said Tesla was finally working on a new, more affordable model that he first teased in 2020.
“We don’t want to talk about exact dates, but that’s the main focus of our new vehicle development team, obviously,” he said, adding that Tesla has completed “engineering for the Cybertruck and for the Semi.”
He described the future vehicle as something “smaller” that “will exceed the production of all our other vehicles combined.”
Stephanie Brinley, associate director of AutoIntelligence for S&P Global Mobility, noted that Tesla’s sales are expected to increase in the coming years despite the decline in market share.
Tesla’s current lead in EVs is over a relatively small market. Despite the attention paid to electric vehicles, sales of all-electric and plug-in hybrid electric vehicles, which include electric motors as well as an internal combustion engine, remain flat.
Of the 10.22 million cars registered in the U.S. through the third quarter, roughly 525,000, or 5.1 percent, were all-electric models. That’s an increase of 334,000, or 2.8 percent, by the third quarter of 2021, according to S&P.
The majority of EVs registered through September — or nearly 340,000 — were Teslas, according to S&P. The remaining vehicles were distributed, very unevenly, among 46 other plates.
But Tesla’s market success, as well as government incentives, have almost forced traditional automakers to push into the growing EV segment.
The Ford Mustang Mach-E, ranked third in EV registrations, is the only non-Tesla vehicle in the top five rankings, S&P said. These EVs were followed by the Chevrolet Bolt and Bolt EUV, Hyundai Ioniq 5, Kia EV6, Volkswagen ID.4 and Nissan Leaf.
S&P noted that EV growth is largely coming from current Toyota and Honda car owners. Both automakers are well-known for fuel-efficient vehicles, but have been slow to transition to all-electric models.
To help curb carbon and other emissions from traditional gas-powered vehicles, several states and the federal government are encouraging the transition to all-electric vehicles with incentives such as tax breaks.
Transportation is responsible for 25 percent of carbon emissions from human activity worldwide, according to estimates by the nonprofit International Clean Transportation Council.