01/10/24 09:10 AM EST

Tesla Market Share Showing Softness

Below is a chart and brief excerpt from today’s Market Situation Report written by Tier 1 Alpha. If you’re interested in learning more about the Hedgeye-Tier 1 Alpha partnership, there’s more information here.

It’s been a while since we last examined the auto market. Perhaps more than any other, the auto industry felt the seismic shifts of the pandemic. From supply chain woes to employment retention credits, Mercedes G-Wagons turned into an unlikely meme stock. Thankfully, the market is stabilizing, albeit amid higher interest rates. The average APR for new cars for those with prime credit stands at 6.88%, while used car financing rates are averaging 3-4% higher. Rates for subprime used car loans are at an eye-watering 18.39%.

In December, wholesale used-vehicle prices, adjusted for mix, mileage, and seasonality, dipped by 0.5% from the previous month. The Manheim Used Vehicle Value Index (MUVVI) fell to 204.0, a 7.0% year-over-year decrease. When we look back to December 2021, we see a nearly 21% drop in used-vehicle values. For context, the MUVVI index hovered just over 150 before the pandemic, indicating there’s still significant ground to cover before we return to those figures.

Tesla has displayed some softness compared to its peers in the "Magnificent 7" this year. At the close of Q3 2023, Tesla's slice of the EV market shrank to 50%, a notable decline from 60% in Q1 and a steep fall from a 79% market share in 2020. Beyond the challenges of charging infrastructure investments, EV manufacturers are grappling with eroding pricing power. In 2023, the average EV sold for $52,500, compared to $48,200 for all light-duty vehicles. Year-over-year, EV prices saw a $13,000 reduction from Q3 2022, while the average cost for all light vehicles remained relatively stable.

Learn more about the Market Situation Report written by Tier 1 Alpha.