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Tesla’s Top Electric Vehicle Challengers in the U.S.

Ford and GM are both making major strides in competing with Tesla in the EV space. But there may be enough room for multiple winners.

Tesla  (TSLA) - Get Tesla Inc Report has, in recent years, become almost synonymous with the electric vehicle market overall.

Given the firm’s status as an early mover into the space and the marketing genius of its “technoking” Elon Musk, the company’s market share dominance is unsurprising. Indeed, the company currently holds a 16% global market share of the EV market, comfortably outpacing its nearest competitors in Volkswagen (13%), SAIC Motors (9%), Groupe Renault (7%) and BMW (6%).

However, a more aggressive crop of American automakers, adding to existing competition from Europe and Asia’s industry leaders, might yet have room to threaten Tesla’s top spot.

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Pickup Steam

Foremost among the emergent challengers is Ford  (F) - Get Ford Motor Company Report, which has wowed even the President of the United States with its new electric pickup.

Presented at an investor day in late May, the company’s Ford F150 Lightning has been termed a breakthrough for America’s oldest automaker. The new offering due to become available late this year brings its best-selling truck into the EV age, enticing customers with a stunningly low starting price tag of just under $40,000.

“Ford F-150 Lightning is likely a watershed moment for Ford and the industry (as it is the best-selling vehicle),” RBC analyst Joseph Spak wrote in a recent note. “For Ford, it not only protects their golden goose, but potentially expands the F-150 franchise opportunity via unique features like Intelligent Backup Power.”

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The latter function, an answer to Tesla’s Powerwall product, is capable of providing 9.6 kilowatts of power, enough to power home appliances and necessities for a few days in the event of a blackout. Essentially, Ford is now disrupting not only the EV market, but the market for home generators it conducts as an ancillary enterprise as well.

Spak added that while Ford will still need to execute on its audacious EV strategy to compete, its dominance in commercial fleets and embrace of electrification of its top products should bode well for investors. Thus far, over 100,000 reservations for the Lightning less than a month after its launch suggest palpable excitement about the product.

TheStreet founder Jim Cramer is certainly among those excited about the offerings already, calling for Ford’s new autos to outclass Tesla’s competing Cybertruck, which he likened to a Pontiac Aztek due to its peculiar, angular design.

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"I think Ford is going to absolutely crush Musk when they do the F-150 electric,” he said on Thursday. “Ford's product versus the Aztek product that Musk has for pick-ups...they're going to run circles around it."

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Not satisfied to be bullish on just Ford in the EV space, Cramer also signaled that General Motors  (GM) - Get General Motors Company (GM) Report, the manufacturer of the new and popular electric Chevrolet Silverado, is undervalued given the early success of its battery business.

The company currently manufactures Ultium batteries, which CEO Mary Barra touted as a key initiative not only in terms of powering their EVs, but as a major cost save, both for GM and industry competitors it is eager to sell those batteries to.

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“We will realize a 40% battery cost reduction with our first-generation Ultium platform compared with today’s Chevrolet Bolt EV,” she explained in a call with analysts in May. “And we’re already on the road to delivering a 60% cost reduction compared to the Bolt EV, with the next generation of Ultium, and we expect costs will continue to decrease from there.”

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Thus far, GM has already inked a deal to provide batteries to Honda’s latest EV models under the Honda and Acura brands.

“I believe Mary Barra has created a situation where the battery business is worth just as much if not more than the actual auto business,” Cramer commented recently from the floor of the NYSE. “The stock is undervalued. I know the stock’s been a winner, but winners win.”

Indeed, Barra is betting quite a bit of cash on the company’s ability to keep winning, pledging to invest $35 billion in its EV and autonomous auto endeavors through 2025.

“GM is targeting annual global EV sales of more than 1 million vehicles by 2025, and we are increasing our investment to scale faster because we see momentum building in the United States for electrification, along with customer demand for our product portfolio,” Barra told investors recently. “There is a strong and growing conviction among our employees, customers, dealers, suppliers, unions and investors, as well as policymakers, that electric vehicles and self-driving technology are the keys to a cleaner, safer world for all.”

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Selling one million vehicles annually would double Tesla’s total global deliveries in 2020, a record-breaking year for the automaker. Further, the company stands to challenge Tesla on not one, but two fronts as it pursues ambitious innovation in autonomous driving.

Motor Trend

Of course, the secular trend of electric vehicles, much like autonomous driving, may be a large enough wave to lift many boats and not necessarily damage Tesla’s top position.

It is true that the demand for electric vehicles in the United States has never been higher. This fact is perhaps the most important reason that the companies are piling into the space in the first place.

For reference, from 2008 to 2010 only 5,000 EVs were sold across the entire United States. Since that modest beginning, electric vehicles have grown into a massive market with over 10 million of these vehicles now on the road. Even in the past year, a time in which overall auto sales were hurt badly by the pandemic, electric car registrations increased by 41%.

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Still, with 276 million total cars on the road in the United States, the total addressable market for all of these competitors remains vast. In contrast to early adopters among the public in Europe, especially among the Nordic nations, and the rapid adoption among the Chinese public, the American market is certainly not oversaturated.

As such, with the secular trend of electric vehicles showing no signs of braking, the overall pie might be big enough pie that each automaker can have a decent enough slice.

“I think that Tesla is going to sell all of the EVs they can build and I think Ford and GM are going to sell all of the EVs they can build over the next several years,” Jennison Associates Managing Director Owuraka Koney said. “We don’t think we’re at the stage of a real fight for market share just yet.”