NIO squeeze, Tesla valuation, and Renault EV IPO

Why Tesla investors must understand terminal market share

Based on the 15 carmakers we track in our BEV model the Q3 delivery figure of BEVs hit 1.7mn up 55% y/y and 2023 is going to be known as the year when BEVs finally hit an inflection point for the overall market including the talk about BEVs impact on oil demand. For Tesla, the Q3 delivery figures also extended the reality that competition is heating up and that its global market share among these 15 carmakers fell to 25.6% down from 31.4% a year ago. This market share is still impressive and Tesla is still more than twice as big as Volkswagen in terms of production, but Tesla is highly likely to lose its top spot in Q4 to Chinese BYD.

Why is this market share trajectory so important? Because the terminal market share in the global BEV market in 2035 is a key input parameter in any Tesla valuation. Tesla’s market value is currently $682bn compared to Toyota’s $303bn. Toyota’s current global market share in ICE (internal combustion engine) is around 10%, so Tesla’s market value reflects potentially different scenarios:

1. At least twice Toyota’s current market share in the long run and no positive change to profitability in the overall car industry
   
   
2. Same market share as Toyota in the future, so 10%, but cars produced with much higher margin that the car industry has produced in the past
   
   
3. A top 3 carmaker in the 2035 or 2040, but with significant market value derived from other businesses such as supercharging network, energy storage, and residential solar module installation.

Renault update on Ampere IPO

Renault’s CEO said today that on Wednesday, at its capital markets day, the carmaker will announce its plans to IPO its electric division (including hybrid and battery) called Ampere. The group is aiming to get a valuation of around €8-10bn and trying to spin the IPO as an European alternative to Tesla. Renault is one of the most successful carmakers in Europe in terms of the EV adoption but the French carmaker is notoriously bad in breaking out separate BEV figures which are the ones the market cares about, so we are still not including Renault in our model over the BEV market. That will hopefully change with the IPO of Ampere which is expected to launch around April or May next year.

Some analysts already think that an IPO is the wrong choice and that it should be a spin-off because an IPO is dilutive for existing shareholders. But in any case, a rapidly growing Ampere needing a lot of capital to grow fast will be dilutive, but the market will be much wiser on Wednesday about what an IPO means for Renault shareholders. If Renault succeeds with the Ampere IPO and it becomes a success it could force other legacy carmakers such as Volkswagen and Stellantis to IPO their BEV divisions.