Market share should be ignored when determining which companies are winning or losing in the electric vehicle (EV) space. With growing markets like EVs, market share is a very incomplete metric. For example, Tesla’s global EV market share fell from 17.7% in 2020 (January - July) to 13.9% during the same period in 2021 as other automakers entered the electric vehicle space.
Ignore the nearly 4 point decline in Tesla market share. It’s unimportant! Why?
During the same period, the company’s sales volume increased 99% - growing from 212,006 vehicles to 421,100 vehicles!
As the overall EV market grew 154% to over 3 million vehicles, Tesla managed to increase its sales nearly 100%. This 100% sales growth is significantly more impactful than 4 points of market share decline.
When markets are growing like the EV segment, automakers that are scaling production and sales quickly will be the winners. Pay attention to scaling, not market share.
Another important metric to know when evaluating which firms are winning in a market, is to know how much of a segment’s total revenue and profits are captured by any one company. Share of total market revenue and share of total market profits make the traditional market share metric even more irrelevant. For example, Apple only captures 13% of the global mobile phone segment, a market share level lower than Samsung. Yet, Apple captures 40% of mobile phone market revenue and 75% of mobile phone market operating profits.
Seventy-five percent of all operating profits in the mobile handset industry are captured by one company - Apple? Again, market share is irrelevant.
Dan Ives (a technology analyst at Wedbush who also covers Tesla and other automakers) believes electric vehicles will be a $5 trillion market globally by 2030. More significantly, Ives thinks Tesla will capture $2.5 trillion of that global EV segment - 50% of the global electric vehicle revenue pie.
Dan Ives might be wrong about Tesla capturing one-half of all EV revenue by 2030. However, his method for determining winners in the space is sound. As more companies enter the EV segment, pay attention to those that can scale as well as those that can capture growing percentages of segment revenue and segment profits. Those automakers will be winners in the space.
What I’m Reading, Watching, and Hearing
Disclaimer
TaaSMaster, LLC is not a registered investment advisor or broker/dealer. All investment opinions expressed by TaaSMaster, LLC are from personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors may occur.