Tesla may have to Give Top Battery Electric Vehicle Sales Position to Volkswagen by 2024

Elon Musk’s Tesla may lose its position as the world’s number one battery electric vehicle (BEV) sales to German giant Volkswagen by 2024, according to a study by Bloomberg Intelligence, entitled ‘Battery Electric Vehicles Report – Automakers Race to the Top’.

According to the analysis, most competitors, including Ford and General Motors, lacked the incentive to catch up as rapidly as Volkswagen due to rising battery costs and restricted production capacity. As a result, Tesla is likely to be the largest EV vendor in the US for some time.

Meanwhile, reports revealed that this year in Q1 despite the mounting competition, Tesla’s Model Y SUV and Model 3 sedan were the two top-selling vehicles in the US.

Volkswagen’s production and sales are concentrated in Europe, and the study has predicted that the business will increase more in China than in the United States.

According to VW’s annual report, US sales accounted for less than 10% of total sales last year.

It was also stated that Tesla’s sales in China, where it now produces two models, are likely to suffer as a result.

According to Kelly Blue Book, Tesla was an early adopter of the EV revolution, accounting for 75% of all EVs sold in the US in the first quarter of 2022. However, as per the experts, competitors are gradually eroding part of that market share by leveraging their size.

Michael Dean, the Senior European Automotive Industry Analyst at Bloomberg Intelligence, said: “Looking ahead, automakers in Europe, China and elsewhere will continue to challenge Tesla via an impending wave of new models, though profit incentives are limited amid rising battery costs and a lack of scale.”

“That may change in 2025-26 as more brands achieve critical mass on new-generation models with proprietary software. There are a number of challenging external factors to consider and bold BEV ambitions have done little to prevent crisis-level valuation multiples, stoked by recession fears, rising interest rates, supply-chain constraints and inflation,” he added.

The cost competitiveness of BEVs is still dependent on battery pricing, and Volkswagen is investing up to EUR30 billion in the supply chain, including the construction of six new battery-cell facilities in Europe by 2030.

Northvolt, a Swedish battery manufacturer, will begin producing premium cells for it in 2023, while Audi’s midsize Q4 BEV SUV already has a similar margin to its internal-combustion-engine equivalent, the Q3.

Steve Man, Senior China Automotive Industry Analyst at Bloomberg Intelligence, noted: “China’s carrot-and-stick approach to stoking EV sales could push battery-electrics to account for 25% of all passenger vehicle purchases by 2025. Sales in China have surged since the launch of the country’s new energy vehicle credit program despite erratic component supply.”

However, as per the analysis, after ceding the first-mover advantage to Tesla and local producers, Volkswagen, BMW, and other Western brands’ sales in China may come at the expense of pricing and profitability.

Local brands like BYD, Nio, Xpeng, and other Chinese automakers are fast narrowing the technology and branding gaps, enticing customers not only with increased driving range and power, but also with reduced costs, luxurious trim, and even virtual-reality entertainment.

It is noteworthy that Ford has taken the lead with the F-150 Lightning, which has attracted 200,000 orders, while GM is working on its next-generation “Ultium” batteries. Volkswagen is also contemplating Porsche, its sports vehicle division, which has an electric model as well.

Meanwhile, it was also stated that Japanese manufacturers are developing complete electrified vehicle plans in order to fulfil the needs of various markets.

The sector, according to experts, is prepared to boost electrification initiatives, employing hybrid expertise to compete, notably in battery electric vehicles, which now dominate their native market.

Tesla, on the other hand, has increased production and taken advantage of the economies of scale that exist among early adopters. It started delivering automobiles from its gigafactory in Berlin in March, with a goal of producing 500,000 cars each year.

But Volkswagen CEO Herbert Diess told media at the World Economic Forum in Davos, Switzerland, that after the firm resolves its worldwide supply chain challenges, it would overtake Tesla as the world’s largest electric vehicle manufacturer within the next 3 years.

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