by Yardeni Research

Just as Tesla joins the S&P 500, the company finds itself facing increasing competition.

Small upstarts hope to replicate Tesla’s success, and established manufacturers intend to defend their turf.

Meanwhile, opportunities for growth both at home and abroad are improving as more countries, primarily in Europe, require all new cars to be electric vehicles (EVs) in the 2030-40 time period.

With its shares up more than 600% year-to-date, it seemed like a good time to look at the state of Tesla and the EV market:

(1) Still leading the pack. Tesla is still the EV manufacturer all others aim to beat, but the competition has gotten more serious and more technologically advanced.

More than 20 new EV models are expected to enter the US market over the next year. One of the more promising offerings comes from Ford Motor.

Its all-electric Mustang crossover, the Mach-E, received mostly solid reviews from the critics. One largely complimentary December 15 MotorTrend review was titled “Detroit Strikes Back.”

One of the Mach-E’s strongest selling points is its range. While most EV competitors run for only 200-250 miles per charge, the premium Mach-E runs for 300 miles per charge.

Others crossing the 300-miles-per-charge mark are Nissan’s new Ariya crossover and Rivian’s SUV the R1S. That’s comparable to the range on most Tesla models, except for one.

In June, Tesla proved it can stay ahead of the competition by introducing its Model S Long Range Plus vehicles, which travel 402 miles on a charge.

Other EVs generating excitement include General Motor’s Hummer, Ford’s F-150 truck, Tesla’s Cybertruck, and Lordstown’s truck.

US EV sales rose by 8.4% to 345,285 vehicles this year, but that still represents only 2.3% of the new US cars sold, according to estimates in an October 30 CleanTechnica article.

A flood of new EV models is expected to boost sales 70% next year to more than 500,000 vehicles, but again that represents only 3.6% of US car sales.

Industry players are hopeful that greater incentives to encourage the purchase of EVs will be enacted under a Biden administration.

Currently, the first 200,000 EVs sold by a manufacturer can use a federal tax credit. The new administration could increase the number of EVs that would receive the tax credit beyond 200,000.

During his presidential campaign, President-elect Joe Biden promoted a plan to have the federal government buy all clean energy and zero emissions vehicles.

His campaign also said that a Biden administration would work to accelerate the deployment of EV charging stations.

(2) Europeans moving faster. The European EV market is making faster progress thanks to the stick provided by the European Union (EU) and many individual countries.

The EU has CO2 emission standards, and noncompliant companies face large fines.

The emission standards get progressively tougher each year, pushing companies to shift more of their portfolios to electric and hybrid vehicles to remain in compliance.

In addition, several countries have announced dates by which gasoline-powered new vehicles no longer can be sold.

Norway’s ban on gas new car sales kicks in first, in 2025. The UK accelerated its ban on gas cars to 2030, up from 2040, but it will allow hybrid car sales until 2035.

Other countries with a 2030 ban on combustion-engine new car sales include Germany, Ireland, and the Netherlands. France’s ban doesn’t go into effect until 2040.

And the mayors of Paris, Madrid, Mexico City, and Athens have said they plan to ban diesel vehicles from driving in their city centers by 2025.

In North America, there are fewer restrictions. British Columbia has a sliding scale requiring that 10% of new cars sold be EVs by 2025, 30% by 2030, and 100% by 2040.

California Governor Gavin Newsom signed in September an executive order banning all in-state sales of gas vehicles by 2035. But no other sales restrictions exist in the US.

EV new car sales in Europe are expected to be 10% of total car sales this year and 15% in 2021, according to the CleanTechnica estimates.

In Germany, where there are many more EV and hybrid offerings than in the US, Tesla is in seventh place in sales.

(3) Battle for battery supremacy. Tesla should be able to retain its dominant position as long as its cars continue to drive longer distances on a charge than those of most competitors’.

But both QuantumScape and Toyota are working on solid-state batteries, which could be a game changer in the EV industry.

QuantumScape claims to have developed a solid-state battery that is smaller, lower cost, less flammable, longer lasting, and faster charging than the lithium electrolyte batteries used in today’s EVs, including Tesla’s.

The solid-state batteries charge from 0 to 80% capacity in 15 minutes, less than half the time needed by currently used batteries.

While only 10 years old, QuantumScape boasts a partnership with VW—and a $300 million investment from it—as well as an impressive board that includes JB Straubel, Tesla’s co-founder who has focused on battery technology, and venture capitalist John Doerr.

More established players are working on solid-state batteries as well. Toyota claims to have a solid-state battery that it plans to sell in an EV in the early 2020s, a December 10 Nikkei Asia article reported.

This battery can power a trip of 500 km on one charge and recharge in 10 minutes. Nissan Motor is developing a solid-state battery for use in a vehicle by 2028, the article states.

And while it’s not working on solid-state batteries, Tesla is continuously working to make its batteries stronger and less costly.

QuantumScape’s shares have been on a wild ride that rivals the one enjoyed by Tesla’s stock.

The company, which has no revenue or profits, agreed to a reverse merger with special purpose acquisition corporation Kensington Capital Acquisition on September 3, and shares of Kensington popped to $18.74 on the news.

The reverse merger occurred on November 27 with the shares trading at $37.00.

And after a presentation about its technology on December 8, QuantumScape shares rallied to $76.61 on December 12. They closed Friday at $73.73.


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