Are Tesla's Record 2021 Profits Enough to Keep It in the Lead?
Tesla is selling a lot of cars.
The electric vehicle manufacturer announced yesterday that it made $5.5 billion in profits last year after selling nearly one million cars. That’s six times more than it did in 2020. But even those numbers weren't enough to reassure investors that Tesla’s future success is a sure thing.
Surprisingly, shares fell sharply after the announcement because it also disclosed that supply chain problems have been forcing Tesla factories to run below capacity for months. Its 2022 outlook was also short on details about when new factories will come online, according to several analysts. Meanwhile, rival EV manufacturers are on the rise as the might of U.S. and global auto manufacturing shifts momentum into sustainable, electric vehicles.
The question, then, is raised: are Tesla's record 2021 profits enough to keep it in the lead?
Big competitors are eating at Tesla's market share
All eyes are on the rapidly growing electric vehicle (EV) market as Tesla prepares to defend its market share against a growing field of competitors that are rapidly introducing new EVs for customers to choose from. In the first half of 2020, Tesla sold 79.5% of all the new EVs registered in the U.S. Its share of new vehicles fell to 66.3% during the same period just a year later. While demand for EVs is growing quickly, investors appear unsure whether Tesla is prepared for the onslaught of rising competition.
Tesla is facing competition from all sides. The most immediate threat comes from the legacy brands already chipping away at Tesla’s share of the market. Chevrolet, Ford, Nissan, and Audi each control more than 3% of the growing EV market, with Chevy’s slice of the pie approaching 10%. Other major players aren’t far behind. Toyota announced in December that it would invest $35 billion in EVs and introduce 30 new all-electric models by 2030. GM committed to an all-electric future with its promise last year to stop selling gas- and diesel-powered vehicles by 2035.
Tesla's future: a circle of heated challenges
But it’s not just the usual suspects Tesla has to watch out for. China's tech behemoth Huawei announced last month that its first vehicle, a gas-electric hybrid, performs better than Tesla’s Model Y on key metrics, like peak power and range. The vehicle will operate using the company’s own operating system, which is integrated with some of its other products and designed to resemble the relationship a user has with their smartphone. Additionally, the EV startup Rivian started rolling vehicles off of assembly lines last year — roughly 1,000 in total — and received $150 billion from stock market investors in its November IPO. Meanwhile, another EV startup from China, NIO, says it sold 25,000 vehicles in the third quarter of last year. That’s a fraction of the number of cars Tesla sold, but it shows the company can do something that’s proven difficult for many companies in the industry — actually making the cars.
Tesla has also fallen behind some self-imposed deadlines. Its Roadster, Semi, and Cybertruck were all supposed to be in production by now, but none of them are. Which is a major bummer for Tesla enthusiasts. But if that's bothering Musk, he's not letting on. This week, the tech CEO said: "I think actually the most important product development we’re doing this year is actually the Optimus humanoid robot." It sounds like typical Musk, but the billionaire isn't alone in his belief that a firm would benefit from making cars and robots. Hyundai's CEO told an audience at CES 2022 that his company was after the same thing.
Tesla's future remains in the balance amid increasingly tense circumstances. And while we can't say for certain whether its latest profits will help it maintain the lead, it's doubtless that a lot of consumers are going to buy an EV in the next decade — and every EV automaker knows it.
Professor Gretchen Benedix is an astrogeologist and cosmic mineralogist who studies meteorites and figures the forming stages of the solar system.