Wither Tesla: Who will dominate the global EV market in 2023?

In 2021, Battery Electric Vehicles (BEVs) passed an important milestone – they made up all the net growth in new car sales globally. Will this trend continue? What can we expect in the coming few years from the major BEV manufacturers? Can traditional automakers successfully re-engineer their business and rise to challenge the emerging electric giants such as Tesla and BYD? Here we’ll take a look at the leading pure BEV manufacturers, a few of their most important legacy competitors, and ask how their efforts stack up. We will also suggest the key questions that each company must answer in 2023.

China

In 2022, BEVs accounted for 19% of Chinese total vehicle sales, one of the highest proportions globally.[1]  This has acted as a powerful spur to Chinese EV makers – the largest BEV manufacturer in the world is now Chinese firm BYD, which overtook Tesla in late 2022, growing deliveries by a blazing 184% in a single year. However, while BYD is the market leader, it faces stiff competition from SAIC, with its joint venture partners GM and Wuling, and Geely Automotive. The big question that the investors are asking of Chinese car makers in 2023, whether electric-focused or traditional, is whether they can break out of the Chinese market, and compete successfully in globally, especially in Europe, with its rigorous safety standards and a customer requirement for high build quality.

Europe

BEVs accounted for 11% of European new car sales. After a slow start in BEVs, Volkswagen has set the pace for European manufacturers, manufacturing almost 800,000 BEVs in 2022. Of course, as the world’s largest carmaker, with over 10m vehicles produced annually by 650,000 workers, it can deploy formidable resources into the contest. While that is true, it is worth noting that VW has made an alliance with Ford to develop BEVs. The fact that even VW did not feel able to shoulder the cost and risks of the EV transition alone is a demonstration of the scale of the challenge. The critical question for VW in 2023 is whether this momentum will be sustained. For those watching the EV market, one of the major developments of 2022 was the firing of VW CEO Herbert Diess in July. Diess is credited with allowing VW to bounce back rapidly from the diesel emissions scandal of 2015 and subsequently pursuing the push into EVs with almost Musk-like zeal. It is unclear wither his successor will continue with the ambitious transition that Diess laid out, to an all-electric model range globally by the late 2030s.[2]

When talking about European carmakers, it is impossible to avoid mentioning BMW and Daimler Benz. Daimler alone is seeking to invest €40bn in the electric transition during the 2020s, and field an all-electric product line-up by 2030. While both are smaller than others discussed here, the question for 2023 is whether their premium market position allows them to compete successfully with Tesla, while being able to maintain greater margins than the mass market carmakers.

United States

As recently as 2020, Tesla accounted for 28% of global electric vehicle sales, dominating the market. While Tesla continues to dominate the US electric vehicle market, BEVs are only just over 6% of US car sales, less than half their global share. The shine has come off the company in the past year, and the uncertainty over Tesla’s future prospects has been reflected in the share price. Tesla’s stock has  been on a roller coaster ride – plunging over 70% during 2022, then putting in a storming 100% rally in early 2023. However, Tesla remains a formidable force, with a first mover advantage, a bulletproof brand and a devoted following perhaps rivalled in the corporate world only by Apple. Recognised by customers for employing cutting edge technology in its cars, it is better known among investors for industry-leading profit margins, which have funded its breakneck expansion. The question for Tesla and its mercurial chief executive Musk is whether it can overcome a challenging 12 months and continue to execute on-plan, completing its factory ramp-ups and ambitious expansion plans.

The US legacy automakers, wedded to large, profitable, but fuel-hungry pick-up trucks, have generally been slow to see the potential in BEVs, exploring the potential via joint ventures, but unwilling to fully commit to the technology. This has started to change in recent months, with a report this week that GM CEO Mary Barra has announced a ‘blitz’ in BEVs for 2023.[3]

Japan

Toyota is a giant of the global automotive industry, and for a longtime the largest carmaker in the world. Toyota has been slow to enter the pure BEV market placing heavy bets instead on electric hybrids and hydrogen. This seems to have been driven both by Japanese national priorities and the preferences of the outgoing chief executive, Akio Toyoda. In the past week, the incoming chief executive, Koji Sato, has said that this will change, albeit slowly, with the flagship Lexus brand to act as the showcase for Toyota’s EV technology.[4] By the end of 2023, we may start to see the results of this pivot.