Elon Musk’s Tesla could lose its dominance as the world’s top seller of battery electric vehicles (BEV) to German giant Volkswagen by 2024, according to Bloomberg Intelligence’s Battery Electric Vehicles Report – Automakers Race to the Top.

According to the report, most competitors, notably Ford and General Motors, lacked incentive to catch up as quickly as Volkswagen due to rising battery costs and constrained production capacity. As a result, Tesla is expected to be the country’s largest electric vehicle maker for some time.

Despite increased competition, Tesla’s Model Y SUV and Model 3 sedan were the most popular vehicles in the United States in the first quarter of this year.

Volkswagen’s production and sales are concentrated in Europe, and the study assumes that the Chinese market will grow faster than the American market.

According to VW’s annual report, U.S. sales accounted for less than 10% of total sales last year. According to the source, Tesla’s sales in China, where two models are now being produced, are likely to suffer.

According to Kelly Blue Book, Tesla was an early adopter of the electric vehicle revolution, accounting for 75 percent of all electric vehicles sold in the United States in the first quarter of 2022. On the other hand, according to analysts, competitors are steadily losing part of this market share by exploiting their size.

Michael Dean, senior European automotive industry analyst at Bloomberg Intelligence, said: “Looking ahead, automakers in Europe, China and elsewhere will continue to challenge Tesla with an upcoming wave of new models, although profit incentives are limited amid rising battery costs and a shortage of scale.”

“That could change in 2025-26 as more brands reach critical mass on new generation models with proprietary software. There are some challenging external factors to consider and bold BEV ambitions have done little to avert crisis-level valuation multiples fueled by recession fears, rising interest rates, supply chain constraints and inflation,” he added.

Battery pricing is critical to BEV cost competitiveness, and Volkswagen plans to invest up to €30 billion in the supply chain by 2030, including the construction of six new battery cell plants in Europe

Northvolt, a Swedish battery maker, will start producing premium cells for it in 2023, while Audi’s mid-size BEV SUV Q4 is already outperforming its internal combustion engine equivalent, the Q3.

Steve Man, Senior China Automotive Industry Analyst at Bloomberg Intelligence, noted, “China’s carrot-and-stick approach to boosting EV sales could see battery-powered EVs accounting for 25% of all car purchases by 2025. Sales in China have skyrocketed since the launch of the country’s new energy vehicle loan program despite faltering component supplies.”

According to the report, sales of Volkswagen, BMW and other Western brands in China may suffer due to lower prices and profitability after giving up the first-mover advantage to Tesla and local manufacturers.

Tesla, on the other hand, has ramped up production while benefiting from early adopters’ economies of scale. The company began exporting automobiles from its Gigafactory in Berlin in March and plans to produce 500,000 vehicles a year.

After solving his global supply chain challenges, Volkswagen CEO Herbert Diess told reporters at the World Economic Forum in Davos, Switzerland, that the company will overtake Tesla as the world’s leading electric vehicle maker within the next three years.

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