What Are Tesla's (TSLA) Main Competitors?

In the electric vehicle (EV) market, one name has long dominated headlines and has often been synonymous with EVs in the public mind: Tesla (TSLA). In recent years, established automakers and ambitious startups have moved into the fast lane with their EV programs in response to climate change and tightening emissions regulations. Meanwhile, Elon Musk's company looks increasingly like it could lose its pole position, having long set the industry pace.

The automotive industry is undergoing its most significant transformation since the introduction of Ford's (F) Model T, driven by the urgent need to decarbonize transportation. Tesla is facing its greatest competition, not just from legacy automakers with their deep pockets and manufacturing expertise, but also from nimble Chinese EV makers with their cost advantages and government backing. The future of this market has profound implications for investors and our collective future. Autos and light trucks make up about 12% to 15% of the carbon dioxide put into the atmosphere worldwide each year.

Below, we'll explore how established players are leveraging their resources to catch up, analyze the threat posed by emerging EV makers, and consider what advantages the company still possesses as disadvantages in the market mount.

Key Takeaways

Tesla has several competitors among traditional carmakers, such as Ford Motor Company and General Motors (GM).
Tesla has succeeded by focusing on premium electric vehicles (EVs).
More competition, however, is entering the higher-end electric and self-driving car market.
Ford, GM, and BYD Company Ltd. are some of Tesla's main competitors.
However, Tesla faces many challenges to keep its spot as the number-one EV manufacturer in the U.S.

Tesla: An Overview

Founded in 2003 by a group of engineers in Silicon Valley, Tesla has grown from a niche EV manufacturer to a global leader in the automotive industry. Since serial entrepreneur Elon Musk became CEO in 2008, the company has been instrumental in accelerating the automotive industry's transition to sustainable energy, especially in the U.S.

Tesla's product line has expanded from its first production car, the Roadster, to include the Model S sedan, Model X SUV, the mass-market Model 3, and the Model Y crossover. In 2023, Tesla delivered its highest total of vehicles yet, 1.8 million cars worldwide, keeping its position as the top-selling EV brand globally.

Tesla has five vehicles on the market: the Model S, Model X, Model 3, Model Y, and the Cybertruck. It says another is nearing production, the Tesla Semi, an electric semi-truck. The concept for the Semi was first unveiled in 2017. After many promised production starts and delays, Tesla said it would launch in late 2025 or 2026. Similarly, Musk has said that robo-taxis, which require fully autonomous capabilities (something of the El Dorado among the tech-EV set), would be out in October 2024, after its own set of previous delays. He also said its entry into the market would help Tesla's market capitalization surpass $1 trillion.

Beyond vehicles, Tesla has diversified into energy generation and storage products, including solar panels, solar roof tiles, and battery systems for homes and businesses. Tesla is thus more than just a car company since its batteries are part of many home solar installation plans across the U.S. and elsewhere. However, automotive-related revenues are about 85% of its total in 2024.

31,008%

From 2010 to Aug. 1, 2024, Tesla's market cap increased from $2.23B to $692.79B, an increase of over 31,008%. That is a compound annual growth rate of 50.25%.

Tesla first turned a profit in 2020, but its financials continue to be volatile. In the second quarter of 2024, the company's profits plunged more than 40% compared to the same quarter the year before. Investors are wondering if this is a temporary blip or if we're now past Tesla's era of explosive growth as competition in the market intensifies.

This comes as the company's high valuation and production targets have also put pressure on Tesla to maintain its early-2020s growth trend and technological edge.

Tesla's Competitors

Tesla may be the most recognized company in the EV industry, but that doesn't mean it's the only one.

Traditional car companies are increasing their offerings of hybrid gasoline-electric cars, plug-in hybrid EVs, and battery EVs (BEVs). Moreover, in China, where Tesla is a well-known brand, it holds just 6.7% of EV market share.

Competitors continue to ramp up manufacturing and sales efforts for good reason. Fortune Business Insights estimates a compound annual growth rate (CAGR) of 13.8% for the worldwide EV industry, from $671.5 billion in 2024 to $1.9 trillion by 2032.

Asked in January 2024 to name Tesla's biggest competitor, Musk was clear: "Our observations are that Chinese car companies are the most competitive car companies in the world." Musk said Tesla couldn't compete without government assistance helping to block that competition. "I think they will have significant success outside of China depending on what kind of tariffs or trade barriers are established," he said. "Frankly, I think that if there are no trade barriers established, they will pretty much demolish most other car companies in the world."

"They’re extremely good," he added.

BYD Company Ltd. (BYDDY)

BYD—which stands for "build your dreams"—is a Chinese multinational corporation that has rapidly emerged as one of Tesla's most formidable competitors in the global EV market. Founded in 1995 as a battery manufacturer, BYD has leveraged its expertise in energy storage to compete with Tesla as the leader in worldwide EV sales each quarter.

Unlike Tesla, BYD benefits from vertical integration that extends beyond vehicle production, including the manufacturing of batteries and semiconductors. This has allowed BYD to control costs more effectively and maintain a steady supply chain, a critical advantage in the EV market. Among its backers has been Warren Buffett's Berkshire Hathaway Inc. (BRK.A), which bought into the company in 2008. In recent years, though, Berkshire Hathaway has been reducing its shares precipitously as it banks significant gains from BYD's greatly increased stock prices.

BYD's EVs include passenger cars, buses, trucks, and even monorails. Among its bestselling models are the BYD Tang, a high-performance PHEV SUV; the BYD Han, a luxury BEV sedan known for its sophisticated technology and extended driving range; and the BYD e6, a widely used BEV taxi model in various countries. But the most talked about by EV market watchers and reviewers is the Seagull, launched by BYD in 2023 and selling for around $12,000 in China. A shorter-range version costs under $10,000.

BYD's Seagull, with rapidly growing market share in the EU and in its home country, is largely blocked from the U.S. by 100% sanctions imposed by the Biden administration in May 2024.

A key aspect of BYD's success in the EV market is its in-house battery production. The company is one of the largest producers of lithium-ion batteries globally, ensuring a reliable supply of its vehicles. Among them is its Blade Battery, which has a design that is far less prone to catching fire, offers higher energy density, and lasts longer.

BYD's international presence has expanded significantly, with manufacturing facilities and partnerships established in the U.S., Brazil, and India, among other countries. The company's electric buses are particularly noteworthy, as they are widely used in cities across Europe, North America, and Latin America, part of a global push for cleaner public transportation.

In 2023, the company reported a total revenue of $60.4 billion and a net profit of $1.5 billion. BYD's EV sales exceeded 1.8 million units, marking a 70% increase from the previous year and putting the company near Tesla in worldwide battery-electric vehicle sales.

In its Chinese home market, the world's largest for EVs, BYD consistently beats Tesla in sales volume. The company's success is built on competitive pricing, government support, and products tailored to local preferences. BYD's growing presence in international markets, including Europe and Latin America, signals its ambition to challenge Tesla globally.

BYD hasn't just been a thorn in Tesla's side from its major leap in sales in recent years but from press comments that get under Musk's skin. Musk has claimed that a future valuation in the trillions awaits Tesla based on a future in the robo-taxi market. That requires fully autonomous cars—and people being comfortable riding in them. In 2023, a BYD spokesperson, Li Yunfei, called the aim "basically impossible," adding that businesses that invest massive capital into self-driving technology will end up with nothing. A year later, Musk responded on the social media platform X, saying that "BYD needs to change course fast, or they're in trouble."

It wasn't BYD that appeared to be in trouble. Among other recent moves, BYD announced a partnership with Uber Technologies (UBER) to bring 100,000 new BYD vehicles onto the Uber platform across Europe, Latin America, the Middle East, Canada, Australia, and New Zealand. Uber said the two companies will also partner in using BYD autonomous-capable vehicles for the Uber platform.

As BYD continues to expand internationally and refine its product offerings, the competition between these two EV giants is now a part of a major trade rivalry between the U.S. and China. While BYD may not yet match Tesla's brand cachet in Western markets, its rapid growth and cost advantages make it the biggest threat to Tesla's global EV lead. They are also a major threat to Tesla's U.S. competitors, which are aiming their EV efforts at middle-income Americans.

In the mid-2020s, Tesla became one of its own biggest competitors. In the previous half-decade, rental car companies had bought many Teslas, seeing them as the next big thing in their market. A pandemic-era slump and other industry shifts meant companies like Hertz (HTZ) started selling off thousands of their Tesla EVs, putting these bargain-priced alternatives in competition with Tesla's new vehicles—enough that if they counted as new cars, they would be among Tesla's top three competitors in 2024.

Ford Motor Company

Ford Motor Company is a multinational automobile manufacturer founded in 1903. It produces electric cars, trucks, and SUVs. The Ford Mustang Mach-E is a popular electric model and has also found favor with reviewers, taking Car and Driver's first EV of the year award in 2021.

Ford initially invested a lot in pursuing vehicle electrification but has dialed back its spending after its EV business, known as Model e, lost $4.7 billion in 2023 and another $1.1 billion in the second quarter of 2024. Ford CEO Jim Farley has blamed these losses on consumers not wanting or being able to afford EVs over gas-powered vehicles while inflation and interest rates stay high.

"I think you're going to see a lot of seismic changes in the industry because of this pricing power reality that we've all faced," Farley said, referring to a common issue for all of Tesla's EV competitors after the pandemic. He said Ford is adjusting its EV strategy based on these new market realities while promising not to bring any EVs to market without a plan for profitability.

Here are the major parts of Ford's EV strategy:

Bring smaller, more affordable EVs to market

Unlike Tesla, which makes its profits from the upscale car market, Farley says Ford is committed to making cars that are affordable for the average consumer. Many of the beneficial climate impacts of EVs won't come to fruition if the vehicles remain the domain of only the wealthy.

"We believe smaller, more affordable vehicles are the way to go for EV in volume," Farley said in mid-2024. "We're focusing on very differentiated vehicles, priced under $40,000 or even $30,000. And we're going to focus on two segments: work and adventure."

5% Is Enough for 2nd Place

Ford's EV sales for the first half of 2024 represented a 72% increase year over year. But they also represented just 5% of Tesla's sales in the same period. Nevertheless, selling just one EV for every 20 Teslas sold put Ford in second place for U.S. EV sales.

Cut costs

Ford has said its success in the EV market requires getting production costs down to those of Chinese manufacturers and Tesla. Ford is considering reducing vertical integration in some areas of its business. This means the company may outsource certain operations it handles in-house, which could help reduce its costs. In addition, Farley said that Ford faces "a lot of tough choices on footprint," which in industry parlance refers to potential factory closures or downsizing to cut costs.

Focus on the commercial EV business

As with Tesla and its Semi, Ford sees great profit potential in commercial EVs. They're an easier sell since consumers see the generally higher price tags for EVs and walk away before calculating the savings over time in gas and maintenance costs compared to gas-powered vehicles. "We see a divergence on electrification adoption between commercial and retail. Commercial customers focus on total cost of ownership," Farley said.

Despite challenges, Ford continues to view EVs as the industry's future, and it's had some success. Among Ford's EVs already on the market are the Mustang, the F-150 Lightning pickup, and the E-Transit van, and it's been working on smaller, low-cost models.

The No. 2 EV brand in the U.S. for the past two years, Ford sold over 43,000 EVs in the first half of 2024, up 71% over the same period a year earlier.

General Motors Company

GM is a U.S.-based automobile manufacturer founded in 1908. In recent years, it has leveraged its vast resources and diverse brand portfolio to challenge Tesla's dominance.

At the heart of GM's EV strategy is its proprietary Ultium battery technology, which is found in EVs across its brands: Chevrolet, Cadillac, GMC, and Buick. This multi-brand approach has helped GM target various EV market segments, from mass-market vehicles to luxury models and even electric trucks.

GM continues to expand its EV lineup, which already includes vehicles like the Chevrolet Bolt, which stopped production but then announced a restart given consumer demand, and GMC Hummer EV, with more models such as the Cadillac Lyriq and Chevrolet Silverado EV on the horizon.

GM has partnered with EVgo to build out a network of charging stations across the United States. This move aims to address one of the critical concerns for potential EV buyers and compete with Tesla's Supercharger network, which still dominates the charging market.

GM's manufacturing capabilities and well-established supply chain relationships provide significant advantages in scaling EV production. However, as a traditional automaker, GM also faces challenges in transitioning its workforce and facilities from internal combustion engine production to EV manufacturing.

GM reported retail sales of 38,355 EVs in the first half of 2024 and is projecting more growth during the rest of the year. The company said it would produce and wholesale 200,000 to 250,000 EVs in 2024, boosted by a number of new launches, including the Equinox EV, GMC Sierra EV, Cadillac Optiq and Escalade IQ, and Silverado EV.

NIO Inc.

NIO is a Chinese holding company that designs, manufactures, and sells premium smart electric vehicles for the international market. These include the EP9, which it asserts is among the fastest electric cars in the world, and its flagship SUV, the ES8. Nio also offers power products, including access to public charging, power mobile charging trucks, and battery swapping.

In the second quarter of 2024, NIO delivered 57,373 vehicles. The company is also rolling out lower-priced cars to challenge its BYD and other competitors. In 2024, it unveiled the first car from its new lower-priced brand, Onvo. This car is about 10% cheaper than Tesla's Model Y.

Based in Jiading, China, NIO had a market capitalization of $9.27 billion as of Aug. 1, 2024.

Volkswagen

Volkswagen is one of the largest automotive manufacturers in the world. Its highly recognizable products and brands include Volkswagen cars, Audi, Bentley, Lamborghini, Porsche, and Skoda.

The German giant offers a wide range of EVs and covers every market segment, from entry-level affordable options to bigger, more powerful alternatives. Moreover, it continues to ramp up its product range, with plans to launch 10 new EVS by 2026.

By 2030, Volkswagen said it thinks at least 70% of its European sales will come from its EVs. In the U.S. and China, meanwhile, the company expects EVs to make up at least half of its sales. It's spending tens of billions to meet these goals.

Founded in 1937, Volkswagen has survived wars, countless cycles of boom and bust, as well as the infamous 2015 emissions scandal in which it admitted that many Volkswagen diesel engine cars sold in America had built-in software that could detect when they were being emission-tested and could alter performance for better results.

Volkswagen is based in Wolfsburg, Germany. As of Aug. 1, 2024, it had a market capitalization of $58.31 billion.

You'll see seemingly conflicting statistics when ranking the sales of EVs by manufacturer. For example, headlines in early 2024 claimed that BYD and Tesla were the world's No. 1 EV manufacturers. That's because some include BYD's plug-in-hybrid EVs (labeled PHEVs), which brings its total sales to 3.1 million units, against Tesla's 1.8 million units.

What Are Tesla's Competitive Advantages?

Despite facing challenges, Tesla maintains several significant advantages that have helped keep it up front in the race to lead the EV market.

Market share is an important competitive advantage to capture and maintain. In the second quarter of 2024, the top five selling EVs in the U.S. were as follows:

Tesla Model Y (30.7% market share)
Tesla Model 3 (12.9%)
Ford Mustang Mach-E (3.8%)
Hyundai IONIC 5 (3.6%)
Tesla Cybertruck (2.6%)

In the second quarter of 2024, Tesla’s market share in the U.S. fell below 50% for the first time. Tesla’s share of the EV segment is dropping as the EV market expands and more makers either enter or establish a greater foothold in this space. However, at about half of total EV sales, Tesla is still the market leader in the U.S. by quite a margin. The company with the second most significant share of sales was Ford. In the second quarter of 2024, it had 7.2% of the U.S. market.

These are some of the reasons why Tesla remains dominant in the U.S.:

Vertical integration

Tesla's vertical integration strategy gives it an edge in the industry. By controlling everything from battery production to software development, Tesla has more direct control over its costs. This approach also allows Musk to bring new products to market more rapidly.

Software and AI-related tech expertise

The company's software expertise is another crucial advantage. Tesla's over-the-air update capability allows it to continually improve vehicle performance and add new features post-purchase, aiming to improve the user experience while extending the life of its vehicles. This software-first approach sets Tesla apart from legacy automakers still catching up in this area.

It also allows Tesla to market itself to investors as a tech company, which traditionally evokes positive investor sentiment. This is among the reasons Tesla's market capitalization is so many times greater than that of companies like Ford and GM, whose sales dwarf Tesla's.

Tesla's charging network

Tesla's Supercharger network remains a significant competitive advantage. With over 45,000 Superchargers worldwide, Tesla offers its customers a reliable and extensive charging infrastructure, addressing one of the primary concerns for potential EV buyers.

While other manufacturers are working to build out their charging networks, Tesla's early investment in this area gave it a substantial head start and continues to provide a major advantage in the U.S. However, an agreement with the U.S. government to share the network with other manufacturers will temper that somewhat.

The Tesla brand

Tesla has some of the best brand recognition in the world. Plus, it gets ongoing word-of-mouth advertising from superfan owners. The company has also cultivated a reputation for innovation and cutting-edge technology that extends beyond automobiles. This brand power allows Tesla to command premium prices and maintain a loyal customer base, even in the face of increasing competition.

Federal policies

There's an irony to Musk's very public support of former President Donald Trump. The Inflation Reduction Act of 2022, signed by President Joe Biden, gave more funding to a revised $7,500 federal tax credit for EVs, significantly impacting Tesla's market position. Initially, Tesla had exhausted its previous tax credits due to high sales volumes, but the new legislation removed the manufacturer cap, making Tesla vehicles eligible again. However, the credit comes with stringent requirements on battery component sourcing and vehicle assembly location, which Tesla has not always navigated carefully.

In May 2024, Biden also increased tariffs on Chinese EVs from 25%—the amount Trump had assigned—to 100%, protecting Tesla from an onslaught of Chinese vehicles entering the U.S. market.

13.2%

Tesla's global share of the plug-in electric vehicle market in 2023.

What Are Tesla's Competitive Disadvantages?

Despite Tesla's significant achievements in the EV market, the company faces daunting headwinds.

An aging product line

Tesla's vehicle lineup is aging. While the Model 3 and Model Y are newer, their designs are also starting to look dated compared with the fresh, less-pricey models being launched by competitors. The company's slow pace in introducing new models and updating existing ones puts it at a disadvantage as the rest of the industry rapidly evolves. Even its newer models, like the Cybertruck, have had significant recall issues.

Erratic pricing

In 2023 and 2024, Tesla often adjusted its vehicle prices, usually cutting them and raising them again as it faced a volatile market. This unpredictable pricing has hurt the company's image as a premium brand and significantly affected the resale value of its cars. Customers who bought Teslas at higher prices feel dissatisfied as their vehicles' market value drops dramatically.

Challenges in China

China, the world's largest EV market, presents a significant challenge for Tesla. Despite its early successes, Tesla faces fierce competition from local manufacturers like BYD and new entrants like Xiaomi. The intense competition, recent price wars, and supply problems have led to production slowdowns and highlighted Tesla's many issues in this critical market.

Those challenges are likely to affect its place in the U.S. market. While the Biden administration's tariffs have staved off Chinese competition for now, analysts have argued it's not if, but when, they enter the U.S. market.

Dependence on autonomous driving

Tesla's pivot toward autonomous vehicles, particularly with the planned robo-taxi service, represents a high-risk strategy. The success of this pivot relies heavily on the development and deployment of reliable self-driving technology, which Tesla has long promised but has yet to deliver. This dependence on an unproven technology adds a layer of uncertainty to Tesla's future business.

Fluctuation in demand

Tesla's global sales for the first half of 2024 were a fifth lower than in 2023, revealing a significant drop in demand as its competitors reported major gains. As the EV market matures and consumers have more options from rival automakers, Tesla's sales growth will increasingly depend on having the right product at the right price.

Changes to its high-end image

With the Model 3 and Model Y accounting for more than 90% of worldwide sales, Tesla's market position has shifted from premium to more mainstream. This could diminish its status as a luxury brand. It also puts Tesla's vehicles head to head with less costly EVs, especially in markets beyond the U.S.

The Musk brand

Musk's personal brand is wholly intertwined with Tesla's, creating many headaches for marketers of the company's image. While Musk's status for many as a visionary with a fan following has undoubtedly contributed to Tesla's popularity, his controversial public persona and erratic behavior have posed significant risks to the brand. Musk's provocative missives on X, public feuds, and political statements have alienated many consumers and investors. Musk's outsized public persona has made it such that consumers feel like they're not buying from a car company but from Musk himself. More and more, many simply don't want to buy from him.

Musk's acquisition of Twitter and subsequent management decisions have further complicated matters, diverting attention from Tesla and raising questions about his focus and judgment. In addition, Musk's tendency to make bold promises about product features and delivery timelines that aren't always met has eroded trust in Tesla's communications. Tesla's quarterly earnings calls reveal many institutional investors prepared to follow Musk the extra mile, but that's not the mass market of consumers he needs.

When Tesla's Stock Goes Down, What Happens to Its Competitors?

In some ways, Tesla's competitors need the company to succeed. As in 2024, a drop-off in its stock price tends to dampen the mood for stocks across the EV sector.

What Is the Difference Between Vertical and Horizontal Integration?

Vertical integration involves a company controlling multiple stages of production or distribution within the same industry. For instance, a vertically integrated car manufacturer might own the factories that assemble cars, the plants that produce parts, and the dealerships that sell the vehicles. This approach allows companies to reduce costs, improve supply chain coordination, and maintain higher control over product quality and timelines. In contrast, horizontal integration involves a company expanding operations by acquiring or merging with other companies at the same stage of production within the same industry. This strategy aims to increase market share, reduce competition, and achieve economies of scale.

What Are the Prospects for Tesla's Robo-Taxi?

Tesla's robo-taxi aims to transform transportation by offering a fleet of autonomous electric vehicles that operate as a ride-hailing service, potentially reducing the need for personal car ownership and revolutionizing urban mobility. The promise of this technology lies in its potential to offer cost-effective, convenient, and environmentally friendly transportation options. However, despite significant investments and progress, Tesla has yet to achieve the level of autonomy required for safe, driverless operation in all conditions. The economic viability of the robo-taxi service hinges on achieving large-scale deployment and operational efficiency. Many analysts have questioned whether such a service could produce the revenues needed, even if Tesla were to surpass all these hurdles.

The Bottom Line

While it has an enormous market capitalization and still enjoys fame for establishing the electrified vehicle market, Tesla has an increasing number of strong competitors. On one side, there is a band of new price-competitive tech companies, including Chinese manufacturers backed by a strong base of home-country consumers. On the other, there are established and well-known firms that have been making cars for decades, such as Ford, GM, and Volkswagen. As these manufacturers develop their technologies and launch more EVs, Tesla could see its market share continue to diminish.