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EV Market Share

Discussion in 'TSLA Investor Discussions' started by jhm, Jul 26, 2018.

  1. jhm

    jhm Well-Known Member

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    Thanks. This is helpful.

    You point out something many people overlook, that as ICE sales decline, the mandated number of EVs to sell also decline. This why apart from Tesla EVs sales are generally declining too. Anti-EV people are quick to highlight declines in EVs sales to argue that people don't really want them. But this ignores that most EVs sold are still largely a compliance play.

    So what do we make of VW? If they have the capacity, but the compliance hurdle falls with ICE sales, what do they do? If they are not turning a profit on these vehicles apart from compliance value, then they reduce production. If demand is not strong, sales also wane. So it it not clear if they are demand constrained or compliance constrained. If, on the other hand, demand was strong with these vehicles priced at a healthy margin, then of course they would sell as many as they could produce.

    It's a tough year for everyone, but I suspect that these vehicles are not profitable to grow much beyond compliance dictated levels. If that is the case, they really are not yet competing with Tesla. They might only be near the top of the EV list because selling EVs is a cost of doing business as automaker.
     
  2. RobStark

    RobStark Well-Known Member

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    Sell EV credits to OEM laggards to help them cross the chasm.
     
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  3. jhm

    jhm Well-Known Member

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    Yes, that's what Tesla has done. Musk has complained about not getting the full value of these credits. So maybe VW's EV profitability is not quite over the hurdle where selling surplus credits to OEM laggards makes this attractive.

    I would argue that there are learning curve reasons press through and build more even if profitability is weak. Moreover, from a competitive view point, it can be good to supply cheap credits to competitors so that they are less inclined to advance along a learning curve. If VW has a chance of preserving market share as EV adoption rises, a chunk of that market share will come from laggards who buy cheap credits instead of learning how to build EVs.
     
  4. Doggydogworld

    Doggydogworld Active Member

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    Well, I attribute the sudden decline in ICE sales to COVID, not the long-awaited arrival of the Great EV Pumpkin :)
    That's only true in China. Tesla sales are declining in Europe, even though overall EV sales are WAY up. Tesla sales are also declining in the US.

    The big decline in China EV sales is due to subsidy-geddon last June. Meanwhile Tesla is selling tons of cars from their brand new factory.

    Quotas ratchet up each year, so compliance EV sales will grow as ICE declines. At least that's the plan. You're right that quota systems will fall apart if people stop buying ICEs on their own accord. But in that case quotas are moot, anyway.

    So far that hasn't happened. Governments are still driving this bus.
     
  5. jhm

    jhm Well-Known Member

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    Tesla's Biggest Profit Driver Isn't Sustainable

    Here's an OK article on regulatory credits. It still spins this as a negative for Tesla, betraying the author's bias, but it is not so dimwitted about it. I am posting here because I think that this issue is best understood through the lens of market share.

    So are regulatory credits sustainable? Well, in the long run BEVs push ICE entirely out of market, right? So reg credits are only as sustainable as ICE. Tesla has maybe 7% of today's revenue to lose from this transition as compared to like 99% of ICE maker's revenue today. So BEVs as a share of auto sales is a key issue here.

    ICE sales in the context of air quality and climate change regulations is what sustains demand for reg credits? If anything as EVs become more affordable and attractive, regulators will tend to find political support for continuing to step up regulations. When most people want both clean air, a climate future, and a nice Tesla at an affordable price, it becomes very problematic to rollback policies that keep the cost of nice Tesla or comparable down by 5%. So I really don't see the regulatory situation improving for ICE makers. Tesla needs to do two things keep leading on environmental issues and keep making BEVs more attractive and more affordable. In short, Tesla should keep delivering on its mission, and regulation will remain a sustainable advantage until nasty, climate destroying vehicles are removed from the market.

    So in my view, demand for reg credits will remain robust through the end of the decade. What about the supply of reg credits. Tesla now has an 18% share of the plug-in EV market globally and pushing 80% in the US (78% in 2019). Thus, Tesla has an outsized share of regulatory credits globally and a near monopoly in the US. So Tesla holds most of the credit for sell and ICE makets can't make enough EVs to meet their demand. As Tesla strengthens its EV market share within a regulatory market it only will become a stronger supplier of reg credits. Indeed, as Tesla's reg credit revenue rises, this is an indication that Tesla is gaining power in the regulatory markets. ICE makers must do two things in response: decrease production of ICE and increase production of EV. However, where Tesla is gaining EV market share, this means ICE makers are falling to ramp up EV sales fast enough. So EV market share competition will force automakers to cut ICE production.

    Another way to look at this is the microeconomics of reg credit production. Suppose an automaker produces an EV earning a $5000 reg credit, but it only nets $2000 profit on the sale of the vehicle (inclusive of the credit). This means that the net cost of the reg credit is $3000. So long as the value of the reg credit remains above $3000 it is marginally profitable for the automaker to keep producing this EV. What happens when Tesla and other EV makers produce such an abundance of reg credits that the price of one drops to $2000? Now this automaker finds itself more profitable buying cheap credits than producing this EV. Tesla and other competitive EV makers, thus seize EV market share away from this erstwhile maker of compliance EVs. Such an ICE maker becomes dependent on cheap credits and loses financial motivation to make EVs because they can't jump directly to fully profitable EVs without the reg credit. Thus, as long as these reg credit dependent ICE makers are still selling vehicles, there is sustained demand for credits. The only question is how much EV maker supply relative to regulatory demand can lower the cost of credits.

    This too explains why regulations will continue to support these credits or adopt other policies to push ICE makers to produce EVs. Suppose a country with a substantial auto sector were to drop regulations altogether. This has the effect of taking the value of reg credits immediately to $0. This leads to a bifurcation of the auto sector. ICE makers stop making EVs. In the short run, ICE makers sip champagne upon quarterly earning, but in the longer run, the whole enterprise is destined for extinction by obsolescence. Thus, this country destroys most of its auto sector causing larger economic disruptions. So the government is underpressure to craft some other inducement to try to transition automakers into the EV business. The basic alternative to regulatory credit scheme is direct government subsidization. If the new scheme is even-handed, then Tesla too gets this subsidy along with the transitioning automakers. I don't think we can rule out protectionistic policies, but the politics get much messier if reg credit schemes are abandoned.

    So what happens as reg credit market become oversupplied? Policymakers can ratchet up demand for credits per ICE vehicle or create other incentives. I think the only realistic decline in reg credits come when EVs become more profitable to make than ICE vehicles. Automakers that lead in BEV profitablity will win share across the market, and reg credits become near worthless. Tesla is presently enjoying revenue from reg credits precisely because it is more profitable making BEVs than the rest of the auto industry. Is this reg credit revenue "sustainable?" No, it is merely a transition to sustainable transportation. It is merely a stepping stone, only to be used while the rest of the auto industry figures out how to make EVs more profitably than ICEVs. By that point in time, Tesla may well seize more market share than Toyota or VW.
     
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  6. jhm

    jhm Well-Known Member

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    EV Sales: H1 2020 sales by OEM

    H2 2020 results are in. Teala moves to 19% share of plug-in market and 28% of BEV market.

    Lately I've been revising my view on Tesla's ultimate share of the auto market. At first I thought that Tesla would walk away with 10%, but then it became clear that Tesla could gain a 20% of the plug-in market and leverage that up to a 20% of the total auto market. But now my thinking is changing again.

    Tesla clearly has the ability to gain 30% share of the BEV market. They presently have 28%. So the question is how long can they hold on to a share of 30% or more. Long enough to gain a 30% share of the whole auto market?

    What exactly makes the presence of PHEVs relevant in the EV market? Several years ago in the Chinese municipal bus market, when BEV buses took off, PHEV buses lost market share rapidly. So the same could happen within other segments. I suspect that PHEVs are mostly built to satisfy compliance needs. As EVs jump from being a compliance play to being a profitable growth story, we could see PHEVs fall out of favor. First they won't be needed for regulatory credits anymore, and second BEV range will be a critical product differentiator. PHEVs may try to boast of superior range enabled by a small ICE, but but this could come accross as a contrivance of automakers that really are not capable of producing a competive long-range BEV. I'm not sure that public sentiment will turn like this, but I don't think we can rule out the possibility that that PHEVs could fall rapidly out of favor within the EV market.

    Additionally, over the long-term, I don't PHEVs or other hybrids having little longevity past ordinary ICE. For example, PHEVs don't need to use gas stations as intensively as ICE vehicles do. So as ICE declines, gas stations go into decline, and this will adversely impact the desirability of PHEVs. Moreover, the fuel demand from PHEVs would be insufficient to maintain a vast convenient network of gas stations. Right now, PHEVs enjoy a near free ride on this infrastructure that ICE vehicles pay for.

    So whether PHEVs go into sharp decline or fade out with all other ICE-ladened vehicles, it matters little to the rise of BEVs. Does making PHEVs give an automaker transferable skill and tech for becoming a competitive BEV makers? In theory, the Chevy Volt paved the way to the Bolt, but it's doubtful this was much of an advantage for GM.

    So why do we care about share in the plug-in market? It think this just comes down to how rare BEVs were years ago. For awhile, PHEVs were the only thing really comparable to a BEV, having the ability to source power from the grid. But I think the time has come that the BEV market is large enough to be analyzed on its own. Moreover, there are unique attributes for comparing BEVs to each other. Range, charge time, and charging network are key performance attributes that don't apply so well to PHEVs or other HEVs.

    So I think I may be done with share of the plug-in market. Tesla has 28% market share, and the rest of the auto industry is going to have a heck of a time prying any of that share back.

    [​IMG]

    Tesla has an 18% point lead on #2 auto group. Toyota is not even on this list. It is curious that Renault-Nissan is in a position to surpass Toyota as an automaker as BEV market grows. Also VW group is in a position to hold onto its 11% market share because it can hold and build its 10% share of BEVs over time. So even though Tesla may ultimately become 3 times the size of VW, this does not necessarily mean that VW will lose its current share of the auto market.

    The top 5 BEV makers are now 62% of the BEV market. This is a substantial amount of consolidation. Will the top five continue to consolidate an even greater share, or will the BEV market become less consolidated over time?
     
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  7. adiggs

    adiggs Active Member

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    We agree on many things @jhm. This one is easy - total agreement. My admittedly anecdotal experience around plug-ins vs. BEV, is that plug-ins make nice transitional vehicles for many people. There's a pretty common theme of people buying plug-ins. Then discovering that they can do a lot of what they do only on electric, it turns into a game to see how much, and somewhere along the line they realize that they should stop hauling around the engine, fuel tank, and other bits and bobs for the gas engine part of the car :)

    So yeah - there's the gas engine market, in which I include plug-ins, and there is the BEV market that is growing into the ICEV market and crushing it :)


    An idea of the history on Tesla's market share on the BEV market? I'm wondering if 28% is down from a previous value, or if Tesla is actually growing market share.

    I also tend to think, today, that VW is the current car maker that has a chance of living into the BEV world (I think Toyota is hosed; GM and Ford likely hosed as well).
     
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  8. jhm

    jhm Well-Known Member

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    The ease of transitioning from PHEV to BEV, I think, is part of what could take them for a dive. Basically, when enough of your friends have made that transition, you too get the message that you may as well jump right past a PHEV to a BEV. So it may be transitional for now, but there is not much to go back for as BEV adoption becomes more mainstream.

    José Pontes mentions that Tesla lost 1% point of BEV market share from Q1. So there is still some play here in the numbers. Q2 was rocky for most automakers. In the short run there are fluctuations around production and product introductions.

    At this point I'm just happy that Tesla is getting near 30%. That is an incredible amount of share to hold onto. It will not be easy. I think the key for Tesla is to keep ramping production on three continents. Scale will help bring down cost. Product development can also begin to cater to regional markets and increase overall product diversity. So the peices will come together.
     
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  9. Doggydogworld

    Doggydogworld Active Member

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    Just to be clear, "plug-ins" include all vehicles with a plug, both BEV and PHEV.

    If I had to choose a single new car I'd get a RAV4 Prime (aka RAV4 PHEV in Europe).
    - I may move to an apartment or condo temporarily, as in the past
    - Every couple years it seems I need to drive 900+ miles in a day
    - I might tow several hundred miles helping my kids move. Or just go adventuring.
    - 42 mile EV range covers normal driving
    - 36 mpg highway is 5 cents/mile, cheaper than Supercharging
    - My prior Toyotas have been ultra-reliable and durable, with minimal maintenance

    After tax credit a nice red or blue one is $20k less than a Model Y AWD while being more flexible and capable. Of course finding one is the hard part! But I'm a patient guy.
     
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  10. RobStark

    RobStark Well-Known Member

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    [​IMG]
     
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  11. RobStark

    RobStark Well-Known Member

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    I am almost certain that by hook or crook the Indian government will carve out space for Tata and/or Mahindra. There will be at least one Indian national champion that takes a significant slice of the global pie if for no other reason that India will shortly be the world's most populous nation.

    The Japanese government will do the same for Toyota. With a shrinking population thay may leave Toyota as a small regional player annihilated in both Europe and North America while never being a player in China/India.
     
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  12. EinSV

    EinSV Active Member

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    #412 EinSV, Aug 4, 2020 at 12:24 AM
    Last edited: Aug 4, 2020 at 12:37 AM
    @adiggs Jose also mentions that Tesla’s BEV market share is up 5% from 2019 (23 to 28%) and if you look back at the first half of 2019 Tesla BEV market share was ~19%, so Tesla gained about 9% market share YoY in the first half of 2020.

    With Model Y production on the way from Fremont, Shanghai, Berlin and Austin, Tesla sales should explode over the next 12-18 months.

    Will other manufacturer’s BEV sales grow just as fast or faster and trim back Tesla’s market share? It’s possible but will certainly be a challenge.
     
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  13. adiggs

    adiggs Active Member

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    My money is on increasing market share by Tesla, not flat or decreasing. At least for the next year - it's hard to project past that, but I suspect the trend will still be the same a. year from now as well.

    Which company is building manufacturing facilities on 3 continents to increase their annual production volume, and which companies are trying to figure out a path to 50k units/year to handle their compliance headaches? Until we see at least one other manufacturer with a high volume EV that they are aggressively trying to grow in volume (and even reach profitability!?!), I see Tesla as continuing to grow market share.

    It might be a higher and higher market share in a steadily shrinking market - that's a different argument for another thread.
     
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  14. EinSV

    EinSV Active Member

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    I hesitate to expect market share to continue to grow only because it is already at such an outlandish level. In the long run I expect China-based OEMs to ramp up production massively, take a significant chunk of the low end of the market, and also nibble at the high end by buying or partnering with luxury oem brands ala Tata/JLR and Geely/Volvo/Polestar.

    In the short run it’s possible that VW’s long-promised EV production plus Chinese mfr ramp could make a dent in Tesla’s market share but I agree the odds favor Tesla at least maintaining share and possibly building it.

    One dead giveaway that legacy OEM’s are still selling only compliance cars is Tesla continuing to maintain 80% market share in the US despite spotting the rest of the industry (except GM) a $7500 federal tax credit advantage. Unreal.

    If legacy doesn’t pick up the pace I expect Tesla to attempt to accelerate to well above 50% annual growth to fill the void.
     
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  15. Doggydogworld

    Doggydogworld Active Member

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    OEMs see no reason to sell more EVs than the law requires. It's a terrible decision if the TMC crowd is right about an S-curve transition, but evidence so far is lacking. 2020 US EV sales could end up below 2018. China will probably be down this year and could also fall below 2018. Europe is way up, but that's purely due to government mandate.

    Despite pulling lots of demand levers the past 18 months, Tesla's US revenue was 5.86b the first 6 months of 2020 vs. 10.76b the final 6 months of 2018. I know... COVID, seasonality, etc. Still, that profile looks a lot more like an enthusiast niche than an S curve.
     
  16. adiggs

    adiggs Active Member

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    The difficulty of increasing market share when it starts off so high is my primary difficulty with increasing market share. My prediction of increasing share is the lack of evidence of serious competition, or even competition that isn't more humorous than real.

    The China based OEMs also seemed to me like the primary potential source of competition. However these are falling behind in China - they've had the liability of designing and building to the old incentives, and aren't doing well with the new and more competitive incentives. Doesn't mean that they won't start doing well in the future, and it might be that they can capture enough Chinese market share to make a dent in worldwide market share.


    I've been following Tesla reasonably closely since 2012 and I keep expecting those better funded and bigger companies to get serious and push Tesla into a niche producer position. The articles about competition today read the same (details slightly different) as they did 8 years ago. The primary difference is that Tesla isn't delivering trivial quantities of units - they're taking over another market segment as they've done to every other segment they've entered previously.

    Thus my conclusion is similar to yours - competition gets with the program or Tesla gets to 50% market share (significantly more ridiculous than the ridiculous 28% market share).
     
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  17. jhm

    jhm Well-Known Member

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    I think part of the problem Toyota has is that Japan is much more hooked on the idea of hydrogen solutions. Japan knows it must import most of its renewable energy. So it is investing in developing hydrogen resources in places like Australia for import. So while I expect the Japanese govt to prop up Toyota, that just may lock them into hydrogen all the more.

    India is an interesting opportunity. I hope Tesla can build there soon.
     
  18. jhm

    jhm Well-Known Member

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    An interesting question whether the investments Tesla is making into new models, battery supply and factory expansion represents a third or more of the entire BEV industry. I'm saying this can be quantified by dollar, because Tesla is moving toward very efficient capital use, but in terms of actual productive capacity. So if Tesla is investing more than a third of the industry, Tesla should be able to grab a third of the BEV market for a while. My impression is that its is expanding faster than the industry as a whole, but maybe other folks have some data to correct my faulty impressions.
     
  19. jhm

    jhm Well-Known Member

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    Right now, it is not that hard for Tesla to gain share in the BEV market. Saturation is not really an issue because Tesla just push the BEV market to expand faster without actually having to push aside other BEV makers. Indeed, Tesla is just grabbing share from ICE. Tesla does not yet have even a full 1% share of the auto market. It can grow ten times bigger and not encounter much saturation resistance. For example, Tesla can put out the Cybertruck or Semi and enter virgin markets for BEVs.

    So why I am fixate on share of BEVs? The BEV market shows us which competitors have game. But the name of game is bringing new tech to market at scale. Wright's law is the critical battlefield. Competitors with a larger share of the BEV market are further along the experience curve. Laggards need market share just to gain critical experience and talent, but Tesla is shutting down that opportunity for many. Some OEMs may need to pool their BEV programs with each other to be able to get critical scale for learning. So as Tesla grabs BEV share, it locks in a durable lead.
     
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  20. renim

    renim Active Member

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    'Mitsubishi's three-year plan announced on Monday also included a freeze on the introduction of new models in Europe. Sales of the current lineup will continue, '
    Mitsubishi to end Pajero production, halt new model launches in Europe

    At the European level, the fine was set at €95 for every gram that exceeds the target (95 g/km), to be multiplied by the number of vehicles sold in the EU from January 1st to December 31th each year. In practice, all car makers have specific targets depending on the characteristics of their own fleets. Individual goals are calculated using the average CO2 emissions of their fleets over the period of reference but also some fine-tunings, such as the average mass of their fleets (the heavier the fleet, the higher the CO2 target) and a comparison to the average mass of all carmakers.

    What i think we are seeing is the first automaker to capitulate under the EU emissions regulations instead of buying credits. Which is ironic, its Mitsubishi, since for parts of europe, Mitusbishi first electric car iMiEV came to market around (even before) the Tesla Roadster.
     
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