Does Tesla Risk Losing Market Dominance?

Tesla slid 3.5% on Monday, closing at USD 899.94. That put the shares below where they had closed right before the $4.2 billion Hertz deal was revealed on 25 October.

The shares which peaked on 4 November was down 21% in December, poised for the worst month since the pandemic erupted.

Hertz’s order for 100,000 vehicles caused Elon Musk-led Tesla’s shares upwards pushing the company’s valuation above the coveted trillion-dollar mark. The rally soon started wobbling after Musk started offloading some of his stake in the company. Tesla’s market cap is now about $904 billion.

A broad market decline weighed on Tesla Monday, with renewable energy firms such as solar companies and other electric-vehicle makers broadly underperforming after Senator Joe Manchin said he wouldn’t support President Joe Biden’s spending plan. Nikola Corp. fell 7.3%, the most since Nov. 18, while Rivian Automotive Inc. dropped 7.9%. Workhorse Group Inc. was lower by 8.9%, and Lordstown Motors Corp. fell 8.2%.

Tesla’s shares currently traded at USD 902, down by 20% over the past month as CEO Elon Musk has sold large chunks of stock to satisfy tax obligations.

Musk has unloaded nearly USD 12 billion worth of Tesla’s stock since 8 November. Tesla used to have several merits including favorable near-term setup, and demand outpacing supply, in addition to the company’s competitive advantage over all original equipment manufacturers today as well as high degree of vertical integration, a software defined vehicle approach, a dedicated charging network, and greater battery capacity.

It does appear the company has already lost market share as legacy automakers begin their foray into the hot electric vehicle market. Tesla held 66.3% of EV registrations in the second quarter of this year, lower than the 79.5% it held one year ago.

GM-owned Chevrolet saw its share of EV registrations rise to 9.6% from 8.3% a year earlier. Ford, Nissan and Audi also picked up market share in the EV industry, per Experian’s data.

It is expected that electric vehicles can reach 14% of global sales by 2025 and 36% by 2030, representing an 30% compound annual growth rate over the next decade.

EV adoption will be driven primarily by tightening global emissions regulations and increased commitment by legacy automakers to electrification. We also see improving cost of ownership and vehicle performance and safety benefits.