Tesla Wannabes’ State of Health in Booming EV Market
June 2022
About 4.9 million battery EVs (BEVs) were sold in 2021, or 6% of the global light vehicle market, up from 2.2 million or 3% in 2020. And 2022 is off to similar a trend which the BCG expects will lead to 20% by 2025 and 39% in 2030. However, not all regions perform the same way. China led the pack in 2021 with an 11% BEV penetration (2.7M units), followed by Europe at 9% (1.2M) then the USA at 3% (0.5M) – though California stood at 12%. Whereas sales in Korea are building steam with 5.5% in first the 9 months of 2021, they remain surprisingly marginal in Japan.
There is no doubt that Tesla boosted the electrification momentum we are experiencing now. Founded in 2003, the company sold 936k units in 2021, overwhelmingly models Y and 3. Tesla accounted for 19% of all BEVs sold globally last year, down from 24% in 2019 and 23% in 2020. It shows that neither the incumbent OEMs nor the emerging ones were able to massively dilute Tesla’s share of this booming market, despite the large number of new products they introduced.
The 126% growth in BEVs sales observed in 2021 led to a 62% increase in the light BEV fleet to 11.2 million vehiclesat the end of last year – almost four times the volume reached three years earlier. However, this still represents slightly less than one percent of the global fleet.
Since its foundation, Tesla has sold 2.4 million vehicles or 21% of the current fleet (assuming most vehicles are still on the road). By comparison, the most mature emerging BEV OEMs of the next wave, Xpeng and Nio, reached about 1/10th of Tesla sales in 2021, i.e., around 100k, and about 200k units to date each. The balance of the global BEV fleet often carries the badge of established Chinese brands such as Wuling (a JV with GM and SAIC) or BYD as 55% of all BEVs in operation are on Chinese roads.
Nevertheless, European, American, Korean – and more recently Japanese – incumbents are not standing still. The VW Group, Hyundai Motor Group, Renault, Stellantis, Ford, GM, Mercedes, BYD and Geely are among the most aggressive OEMs. These incumbents have introduced mainstream products such as VW’s ID.4, Hyundai Ioniq 5, Peugeot e-208, Renault Megane e-Tech, Ford Mach-E, GM Bolt or BYD Dolphin. Yet, Tesla remains a distant leader, even taking the overall market leadership in Europe with Model 3 in March 2022 and two other months in 2021.
A group of Tesla wannabes started emerging around 2015. The most advanced ones, i.e., Nio and Xpeng, brought their first BEVs to the Chinese market in 2018. Similarly, Rivian and Lucid started delivering their first products to US customers earlier this year. Others, such as Byton, presented products but failed to bring them to life. Back in December 2018, I analyzed how these various players were progressing (see article). It is time to reassess where these companies stand.
China - Foreign Incumbents Loose Ground to Local OEMs, Startups Gain Traction
Foreign incumbents are losing ground as the market is quickly shifting to BEVs with “smart” interiors and features. Their penetration of the plug-in EV market is significantly lower than that of the historic ICE vehicle market, reaching now only 20% of the former. This is all the more critical as the plug-in EV market continues to grow quickly, more than doubling in the first four months 2022, whereas in 2021 the total market declined. VW Group and GM are losing the most in this shift.
Chinese OEMs – especially emerging ones – demonstrate a superior ability to digitalize their cabin and infotainment systems, replicating the smartphone space in many ways. These are things Chinese consumers are highly sensitive to, at the expense of brand loyalty. Tesla is the only foreign OEM with a significant EV market share. In the first four months of 2022, the US company led this market with a healthy margin ahead of SAIC and BYD.
Xpeng and Nio are the most successful emerging New Energy Vehicles companies in China. They introduced their first products in 2018 and reached sales of 98k and 91k respectively in 2021, relying on three and four nameplates. The two companies went public and are currently valued around $25-30B after reaching three times as much as at their peaks. Financial proceeds from going public have allowed them to be ambitious in their product and commercial developments.
Both companies started selling in Europe last year, initially in highly electrified Norway. They are also investing in technology. Later this year, Xpeng will introduce a new, 7-seat SUV with an 800V architecture (see G9 above). Nio opted for a battery-swapping model and has now installed over 900 swapping stations – including in Norway.
These two leaders are not alone attempting to become BEV players. Dozens of companies have tried. Among those in a second tier are WM Motor and Leapmotor which each sold about 40k BEVs last year. Aiways, a smaller player with 2 BEVs, even started distributing them in Europe in 2021.
Europe – Few Startups Emulate Tesla
The VW Group is in the leadership position for BEV sales (25% market share) followed by Stellantis, Tesla comes in third position while remaining the best-selling BEV brand with the best-selling BEV. Europe does not have an array of emerging OEMs like China or the USA does to challenge incumbents. However, a few companies stand out which include Arrival, Sono Motors and Lightyear.
UK-based Arrival first focuses on an electric light commercial van of which UPS ordered 10k units. But it is also developing a robotaxi in partnership with Uber which it intends to introduce in late 2023. Now a publicly traded company, Arrival is reasonably well funded (close to $1B) and has announced nimble manufacturing facilities in the UK and N. America.
Respectively based in Germany and the Netherlands, Sono Motors and Lightyear have raised less money than Arrival (about $270M for Sono and $100M for Lightyear) but are forging ahead with their own vehicles. Their future BEVs have in common solar panels covering a significant portion of their bodies. However, they are positioned at very different price points – 28.5k€ for Sono’s compact minivan vs. 150k€ for Lightyear’s large sedan (see below). Start of production is scheduled for 2022 for Lightyear and 2023 for Sono, both at Valmet’s plant in Finland. The two companies will likely need more funds to scale.
Interestingly, there are also early-stage startups that aim to introduce hydrogen fuel cell powered vehicles. For instance, France-based Hopium is developing a large sedan with a 1,000 km range. However, gaining traction across the entire ecosystem – especially the charging network – will be challenging for personal vehicles.
USA - Tesla Leads Very Comfortably, Startups Scramble to Scale
The USA has been slower than China and Europe in adopting BEVs as shown earlier, but the pace is building momentum in part due to the introduction of new products and rising customers’ interest. Nevertheless, Tesla still controlled over 70% of the BEV market in Q1 2022 – Model Y alone accounted for a third of all BEVs. In California, the company’s share of the light vehicle market even exceeded 10% over the past two quarters.
Beyond Tesla, the USA has proven to be a fertile ground for BEV startups. The most mature and best funded players in the next wave are Rivian, Lucid and Fisker. All three companies went public in the past 2 years and are now valued around $30B for the first two and $3B for the latter – all significantly below their highs – after raising about $10B, $6B and $1B respectively.
It should be noted that these companies do not all share the same operating model. Fisker has largely outsourced its engineering work and will rely on contract manufacturing (Magna Steyer then FoxConn) whereas the other two are undertaking these activities in-house.
Rivian and Lucid both introduced their first models on the US market earlier this year, respectively a rugged, highly capable pickup truck (see RT1 below) and a luxury, high performance sedan (see Air above). The vehicles have starting prices of $67k and $87k respectively. Fisker’s first product, a compact SUV, is positioned at the heart of the market at $37.5k with deliveries starting later this year.
These products have been well received. However, production ramp-up is challenging at Rivian and Lucid. The former now plans to produce 25k vehicles in 2022 and the latter 12-14k units. This results from a difficult learning curve – see Tesla’s “production hell” – combined with an industry-wide component shortage. However, I suspect Fisker will have an easier time ramping up as Magna Steyer is an experienced vehicle manufacturer.
The future of these companies depends on their ability first to scale production then to gain lasting market traction. To this end, Rivian is launching in parallel an electric delivery van (Amazon ordered 100k units) and an SUV on the same platform, Lucid will introduce an SUV in 2024 and Fisker is preparing a lower priced compact SUV for 2025.
Other BEV startups have been less successful. Faraday Future, Byton, Bollinger, Lordstown and Canoo are all suffering at best, either closing, pivoting or limping as they still try to make it to market. Consolidation and closure will occur in this league.
Last, we should not ignore Apple which has been toying for several years with the idea of designing and launching its own BEV. Yet, very sparse information has leaked to date as to their plans which seem to have evolved significantly over time.
BEVs Players Emerge from Other Regions
Sony has decided to get serious after presenting Vision-S, their first concept car, at CES 2020. Last March, they signed an MoU with Honda to “deepen discussion and exploration of forming a strategic alliance that aims to create a new era of mobility and mobility services.” It seems clear the question is no longer “if” but rather “how” as the two companies plan to start selling their first BEV in 2025.
Other companies are emerging outside the Europe-China-USA triad with ambitious plans to enter the BEV market. Created in 2017 as part of Vietnam’s Vingroup, VinFast presented 5 different BEVs at CES 2022 and later announced plans to establish a manufacturing base in the USA. VinFast will introduce VF8 and VF9 (5- and 7-seat SUVs) in Europe and the USA in late 2022 / early 2023. And there are more emerging BEV players such as Turkey-based TOGG. This growing number of players is not sustainable.
Consolidation and attrition are unavoidable, but which companies will be the winners?
Marc Amblard
Managing Director, Orsay Consulting
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