Let's start this by being very clear about one thing: Tesla (NASDAQ: TSLA) still largely dominates the U.S. electric vehicle (EV) market, and its price cuts have put serious pressure on competitors. However, new vehicle registration data shows Tesla's dominance is slowing a bit and a handful of brands are surging. Here's what investors need to know.
By the numbers
Here are the new EV U.S. registrations for January through October 2023, for any brand that generated over 1% market share. The takeaways are pretty obvious, and Tesla's dominance in market share is clear.
There might be a couple of surprises up there for many investors. Some investors might not have heard of Rivian (NASDAQ: RIVN) as the young EV maker is still gaining traction with word of mouth and owns only one production factory. Another surprise could be Hyundai, which doesn't make as many headlines -- especially when it comes to EVs -- as Detroit automakers such as Ford Motor Company (NYSE: F) and General Motors (NYSE: GM).
While the graphic emphasizes total market share, what it leaves out is growth. Which brands are currently surging as Tesla's dominance and market share growth slows a bit?
Surging brands
Most noticeable are the luxury brands, BMW and Mercedes-Benz, which are suddenly eating more of the U.S. market pie than before. In fact, according to the latest figures from Experian, BMW more than quadrupled its EV sales from January through October, compared to the prior year.
Behind BMW were luxury icon Mercedes-Benz and global vehicle juggernaut Volkswagen, both right on the tail of BMW's gains. Rivian, which finally put production bottlenecks in the rearview mirror and has upgraded full-year production guidance twice in 2023, also nearly tripled its new registrations for the same period.
Fair or not, because of Tesla's large market share chunk, its slowing growth -- it gained only 6.9% market share during the same period -- has been used as a barometer for overall EV demand health. For context, battery powered electric vehicles began the year with 7.1% market share of the overall light-vehicle market, and hit 7.4% in September and October.
Why the disappointment?
EVs are still gaining traction and according to the National Automobile Dealers Association, EV sales broke the 1 million unit milestone in November. The problem comes with expectations built around similar circumstances across the globe.
According to an analysis by Bloomberg, a worldwide trend had been established by roughly 18 other countries. The trend was that once a country moved past the 5% EV market share threshold, of the overall market, mass adoption started taking place and would power EV market share to 25% by the end of 2025.
The trend is typically viewed as an "S" curve, where growth is slow with early adopters before a rapid surge in mass adoption takes place, before eventually flattening back out as the last holdouts cling onto the previous technology as long as possible. So why is America's mass adoption looking more like a gradual slope than S-curve? It may be because of a different economic environment.
"Americans are contending with higher living costs and soaring interest rates, prompting a shift in preference toward lower-cost new vehicles. That deviation hasn't boded well for the pricier EVs," Jessica Caldwell, director of insights at Edmunds, told Automotive News.
The good news
Ultimately, investors should probably view the minor slowdown in EV adoption as a speed bump due to outside forces such as inflation, high interest rates, and other factors. But what's really important from this data is seeing which brands and companies are still surging and seeing healthy demand amid the slowdown, and for investors of Rivian, that's just more really good news as the company heads into 2024. Rivian hopes to be gross-profit-positive in 2024, and a key component of that will be healthy demand to match its accelerating production.
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Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool has positions in and recommends Tesla and Volkswagen Ag. The Motley Fool recommends Bayerische Motoren Werke Aktiengesellschaft and General Motors and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.
More Good News for Rivian Investors -- at Tesla's Expense was originally published by The Motley Fool
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