When Elon Musk said Hyundai was "doing pretty well" in June, the South Korean automaker was unlikely to pose a serious competitive threat to Tesla any time soon. But the latest sales figures and similarities with Apple and Samsung in the 2010s show that the pace of change is accelerating.
Based on information on Wapcar.my, Hyundai Motor and its Kia subsidiary are second to Tesla in the US electric car market in terms of sales this year. The duo's market share in Europe has reached 12% after achieving the biggest increase in market share among its peers last year. Globally, outside of China, Hyundai and Kia are the second largest manufacturers of electric cars in terms of shipments, with a 14% market share. Tesla comes out on top with 27%.
The gap reflects the competitive advantage Tesla has gained over a decade of maintaining its market leadership position. Tesla's fun factor - brand studies have ranked it as the "coolest" automaker among millennials - is hard to repeat. The same goes for its network of fast chargers, remote software updates, and huge amounts of data from drivers that, combined with machine learning algorithms, continuously improve its software.
The latest boost for Tesla came last week. The list of car models eligible for tax credits from President Joe Biden's new Inflation Cut Act includes four Tesla models currently on sale, but none from Hyundai or Kia.
A more precise comparison can be made by looking at the margins. Tesla's lean business model means it achieves a whopping 16% operating margin, more than double Hyundai's 6%, which has more product lines and must compete with an alliance. strong.
Stock market valuations reflect this contrast - and divergence of market expectations. Tesla shares trade at 60 times previous earnings, more than 10 times that of Hyundai. Hyundai's soaring electric vehicle sales and the resulting record profit in the most recent quarter did little to alter relative pessimism.
But Hyundai's pace of change was much faster than expected. Its electric sedan Ioniq 6 can travel 610 kilometers (379 miles) on a single charge, longer than both Tesla's Model Y and Model 3. Its electric SUV Ioniq 5 has become the best-selling imported electric vehicle in the United States. Remote software updates are starting to roll out.
Price is also catching up. Tesla's cheapest Model 3 is currently on sale for $46,990 following a price hike this year. Hyundai's Ioniq 6, launched last month, is priced the same.
It is also worth considering other industries, such as smartphones, for similar models. It was not until Samsung raised the price of its products and began to compete in the same market segments as Apple, the market leader at the time, that the market share and profit grew significantly.
In 2010, Samsung's share of the global market was less than 6%, compared with more than one-fifth of Apple's. Only two years after launching its more expensive line of Galaxy smartphones, Samsung was able to overtake Apple in global handset sales.
In the third quarter of 2013, Samsung's global smartphone market share was nearly three times that of Apple's. So far, the starting prices of Apple and Samsung smartphones by product segment have remained closely in sync.
In the coming months, electric carmakers will face an uphill battle to protect their profits as costs rise. The price of lithium, an important battery material, remains near historic highs. This has led to an increase in battery prices, up to 60% of the total cost of producing electric cars. Tight profit margins from global battery suppliers suggest that battery prices will not ease. That leaves electric carmakers with the burden.
Here, Hyundai has the upper hand. The Korean won is weaker, having fallen 13% against the dollar this year, leading to a revenue increase of more than $1.6 billion last quarter. This has helped it absorb higher battery and component costs without impacting profitability. It uses local battery suppliers, which means a more stable supply chain and reduced risk of currency fluctuations.
A weak won means Hyundai can continue to keep prices unchanged while maintaining profit margins as competitors are forced to pass on increased costs to consumers.
When expectations are low, the upside potential - for sales volume and stock price - is high. Perhaps one of Hyundai's biggest advantages today is the low expectations it has long struggled with.