One of the biggest questions facing automotive industry investors is whether legacy would matter to consumers when the transition to electric vehicles (EVs) took place. For instance, Ford Motor and General Motors have long dominated the full-size gasoline-powered truck segment — and made handsome profits from it. But would that history of dominance translate to electric trucks?
If recent global EV sales are any indication, the game might be about to change and that’s good news for young EV makers such as Rivian Automotive (RIVN -0.26%), Lucid Group, and Fisker.
What the sales say
During the fourth quarter of 2023, Tesla delivered 484,507 vehicles. That result was slightly ahead of analysts’ estimates but behind emerging Chinese EV juggernaut BYD, which delivered 526,409 fully electric vehicles.
This may come as a surprise to some investors, especially considering BYD is far from a household name in the United States. But Chinese EV automakers shouldn’t be forgotten since they have focused on tech and hold a competitive advantage with lower manufacturing costs.
The automotive industry has long been dominated by automakers such as Ford, GM, Toyota, and Volkswagen selling millions of vehicles globally. So the fact that a young automaker such as Tesla and largely unknown foreign rival BYD are topping EV sales is a huge indication that consumers are pretty much starting with a blank slate when it comes to purchasing EVs.
“The competitive landscape of the auto industry has changed,” said Bridget McCarthy, head of China operations for Shenzhen-based hedge fund Snow Bull Capital, according to Automotive News. “It’s no longer about the size and legacy of auto companies; it’s about the speed at which they can innovate and iterate.”
What’s next?
There’s a good chance that BYD will not lose its grip on the global EV sales crown anytime soon. Already the Chinese EV maker offers a handful of high-volume models in it home counmo that are far cheaper than Tesla’s Model 3, and Tesla’s fourth quarter in the U.S. market likely pulled ahead some sales from the first quarter due to its models receiving less tax credits, depending on the model trims, in 2024.
For Rivian, the company has done well proving that its vehicles are high quality with numerous awards and accolades for the R1S and R1T. But going forward it needs a higher volume and lower priced vehicle to really emerge as a big EV player — especially considering legacy seems to matter less in the segment.
The good news is that Rivian is breaking ground on its Georgia factory early in 2024, which will develop its R2 platform of vehicles that should cost between $40,000 and $50,000. That’s compared to the cheapest R1 models that start around $78,000.
Rivian currently has momentum and should continue to accelerate production, which remains its biggest lever to pull for profitability. And if the company’s R2 vehicles are a hit, the slate is clean for a new brand to jump up the EV rankings.
Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool has positions in and recommends Tesla and Volkswagen Ag. The Motley Fool recommends General Motors and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.
