Dow Jones Futures: Tesla's BEV Crown Slips as Rivals Gain Ground
Wednesday, Jan 1, 2025 9:49 am ET
As the calendar turned to 2025, investors found themselves grappling with a new reality: Tesla's (TSLA) once-unassailable dominance in the battery electric vehicle (BEV) market was under threat. The Dow Jones Industrial Average (DJIA) futures edged higher on New Year's Eve, but the broader market sentiment was cautious, as the S&P 500 and Nasdaq Composite futures also inched up. The market's muted response to the year-end rally, known as the Santa Claus rally, suggested that investors were taking a more measured approach to the new year.
Tesla's market share in the BEV segment has been steadily eroding, as competitors have gained ground with innovative new models and aggressive pricing strategies. In the first half of 2024, Tesla's US sales fell eight percent, while in Europe, the drop was even more pronounced at 13 percent. This decline in sales can be attributed to increased competition from other EV manufacturers, who have introduced new models and gained market share. For instance, in Europe, Tesla's market share fell from 19.8 percent to 17.2 percent, while in the US, it dropped from 59.8 percent to 51.2 percent. Numerous competitors, such as Hyundai, Ford, Rivian, and Kia, posted strong gains amid Tesla's losses.
Tesla's price cuts and incentives have had a significant impact on its market share and profitability. In the second quarter of 2024, Tesla's gross margin dropped to a new low after declining every quarter since Q1 2022. The company's Q2 automotive gross margin was 14.6 percent, compared to analysts' estimates of 16.3 percent. Musk forecasted that self-driving software would drive future growth, but the company's focus on moonshots like FSD and robo-taxis has led to a realization that they are finally in the boring car business.

Competitors' innovations in EV technology and design have also contributed to Tesla's decline in market dominance. Traditional automakers like Hyundai-Kia, Ford, BMW, and Porsche have introduced EVs with advanced features and technologies, challenging Tesla's dominance. For instance, the Hyundai Ioniq 5, Ford F150 Lightning, BMW i7, and Porsche Taycan have gained popularity due to their innovative features and performance. Chinese automakers like BYD have also made significant strides in EV technology, increasing their market share by 9 percentage points between 2021 and 2024.
Tesla's aging product line and delayed new launches have further impacted its competitiveness. The company's Model S, for example, has been on sale for a considerable period, with three different generations of the Mercedes-Benz S-Class being introduced in the same timeframe. This indicates that Tesla's product line is aging, and competitors are introducing newer models with advanced features and technologies. The Cybertruck, Tesla's newest vehicle, has not taken off in terms of sales, with only 11,300 sold in the US through the first half of 2024. This slow start can be attributed to production issues and delays, allowing competitors to capture market share.
In conclusion, Tesla's BEV crown is under threat as competitors gain ground with innovative new models, aggressive pricing strategies, and technological advancements. The company's aging product line and delayed new launches have further impacted its competitiveness, leading to a decline in market share and profitability. As the market enters 2025, investors should closely monitor the BEV segment and the broader EV market to identify potential opportunities and risks.