Tesla risks losing European crown as EV market share stalls, competitors emerge

Tesla may be about to lose the European crown in terms of top EV manufacturer, Bloomberg Intelligence (BI) analysis suggests.

With the prospect of the EV share of the market levelling off this year and Volkswagen launching new models to compete with the increasingly expensive Model Y, Tesla will struggle to dominate in a market landscape characterised by significant discounting.

BEV sales fell to 13.4% of the total in March vs. 15.1% last year, with Tesla's share down to 18.7% from 29%.

Gillian Davis, BI autos analyst, commented: “Tesla, which is cutting its staff by 10%, kept its European BEV market share lead in March, ahead of a Model Y price hike and Volkswagen group launch of several new competing models including the ID 7 tourer and Audi Q6.

“Still, Tesla sales can be lumpy as the Model 3 is imported from China and with waning consumer demand highlighted by the BI European car buyers survey in March. The company sold almost 35,000 units in March we calculate, for an 18.7% share, down from the prior year's 26.9%. That compares with VW Group's 15.1% vs. 18.7% a year earlier. Stellantis was a close third with 14.1% share.

“Tesla's Model Y remained Europe's best-selling BEV in the two months to February, as competition from Chinese brands increased, with MG's MG4 climbing to fourth most popular model, though BYD only musters a 1.5% BEV share.”

BEV sales have started to slow, and BI sees them increasing only marginally in Europe to 18% of total sales in 2024 from about 15.3% in 2023. That's despite an emerging price war with manufacturers reducing the net average selling prices with more significant discounts.

Discounts tend to climb toward year-end to help companies achieve volume targets, though they have risen for most carmakers since January. BI anticipated BEV demand would soften after the latest BI European private car buyers survey found just 18% of respondents intended to purchase one.

February's 12.8% BEV share was below the 12.9% a year earlier, yet the portion in the first two months of the year was up 80 bps to 12.2%. BEV market share was 15.3% in 2023.

European new car registrations may flatten in March, based on BI’s analysis of the top five markets, for a year-to-date gain of 6%. Sales in Europe could be down 2% in Q2, BI calculates, which would make registrations for the full year relatively flat vs. 2023.

This compares with a 13.7% increase in 2023 as the economy stays weak. Supply chain constraints have abated but consumer budgets squeezed by inflation and higher interest rates are drags. The reversal of a trend of demand exceeding supply, which has persisted, pushing pricing and profit margin higher, is a key industry risk this year as vehicle output normalises and orders soften.

Michael Dean, senior BI autos analyst, added: “A lacklustre economic backdrop doesn't necessarily mean fewer new car sales in 2024, because volume is still close to previous European recession lows and we expect net prices to fall as automakers battle for market share.

“Still, tightening consumer budgets amid high interest rates may keep sales growth in the single digits. Easy prior-year comparisons, pent-up demand and inventory channel rebuilding that supported registrations in 2023 could give way to normalizing production and shrinking order backlogs. ACEA forecasts EU new car sales in 2024 will rise 2.5% vs. 2023, a slower pace of growth than last year. We see sales to be relatively flat vs. the prior year.”