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Tec Startup Garage: BATCH 2 2021B

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Archipp Tikhonov
Archipp Tikhonov

Sales Share Time

In some cases, companies may go so far as operating at a loss in some divisions in order to push out the competitors or force them into bankruptcy. After this point, the company may increase its market share, and further increase prices. In financial markets, market share can greatly affect stock prices, especially in cyclical industries when margins are narrow and competition is fierce. Any marked difference in market share may trigger weakness or strength in investor sentiment.

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To gain greater market share, a company may apply one of many strategies. First, it may introduce new technology to attract customers that may have otherwise purchased from their competitor. Second, nurturing customer loyalty is a tactic that can result in both a solid existing customer base and expansion through word of mouth. Third, hiring talented employees prevents costly employee turnover expenses, allowing the company to instead prioritize its core competencies. Finally, with an acquisition, a company can both reduce the number of competitors and acquire their base of customers.

To determine a company's market share, you take the total sales of a company and divide it by its industry's total sales over a given period. For example, if a company sold $2 million worth of dishwashing liquid and the industry's total sales were $15 million, the company would have a market share of 2/15 = 13.3%

A low market share is considered to be a market share that is less than half of the market share of the industry leader. So if the industry leader has a market share of 40% and another company has a market share of 10%, that company would be considered to have a low market share as 10% is less than 20% (half of 40%).

In Europe, Volvo Trucks has a market share of 18.2%, which is the highest ever. Volvo Trucks is the market leader in several European countries. The company also increased its market shares in North America and Australia, to 10.8% and 17.0% respectively. In Brazil, Volvo Trucks increased its market share to 24.6% and thereby became the market leader for the first time ever.

The highest market share for new electric car sales in 2021 in Europe are Norway (86%), Iceland (72%), Sweden (43%) and the Netherlands (30%), followed by France (19%), Italy (9%) and Spain (8%). For the first time in 2021, the bigger market of the United Kingdom was not included in European Union-wide regulations, although it has put in place national law that mirrors EU regulations. The key driver underpinning EV growth in Europe is the tightening CO2 emissions standards that occurred in 2020 and 2021. The expansion of purchase subsidies and tax benefits in major markets also contributed to the acceleration of sales.

Globally, there were over 450 electric car models available in 2021, an increase of more than 15% relative to 2020 offerings and more than twice the number of models available in 2018. Over the 2015-2021 period, the CAGR for new models was 34%. The increase in the number of available EV car models is associated with a notable increase in sale volumes in all markets. This reflects the interests of automakers to capture EV market share by producing new options quickly to appeal to an broadening pool of consumers.

As in previous years, China offers the broadest portfolio, with nearly 300 models available, compared with 184 in Europe and nearly 65 in the United States. Thanks to consistently high electric car sales, Chinese automakers have been able to diversify offerings and market a larger number of products over the years. Availability increased in all major markets relative to 2020, but increased more in Europe (26%) and the United States (24%) than in China (13%) as these markets catch up.

In 2021, global sales of conventional sport utility vehicles (SUVs) marked another record, setting back efforts to reduce emissions. This development is also seen in EV markets. SUVs and luxury models typically generate much larger profit margins, which is one reason why automakers promote them and boost supply. About half of the electric car models available in major markets in 2021 were SUVs, far ahead of small (10%) or medium-size models (23%).

While smaller electric car models are BEVs for the most part, the share of PHEVs in larger models and SUVs is higher, especially in Europe and the United States. This may result from automakers discontinuing some high power, luxury conventional vehicle models to offer these as PHEVs instead. In 2022 and beyond, expectations are for even more electric SUVs to reach markets as automakers and OEMs accelerate efforts to electrify this fast growing segment to simultaneously seek profits from larger models and comply with policy and market regulations. This is expected to result in even higher demand for large battery designs and the raw materials to produce them.

Over the 2015-2019 period, the sales-weighted average range of new BEVs increased steadily at a 12% annual growth rate on average, but then stagnated in 2019-2020, and only moderately increased in 2021 (up 3.5%), to reach 350 kilometres (km). The CAGR over the 2015-2021 period remained high at 9%, reflecting sustained efforts to improve vehicle efficiency and increase battery size. The sales-weighted average driving range of new PHEVs increased by 8.5% in 2021 and exceeded 60 km for the first time, after several years of relative slow growth, resulting in a 2.7% CAGR over the 2015-2021 period. This increase in part is due to the availability of new PHEV models equipped with larger batteries and thus lower rated CO2 emissions.

Driving range remains an important consideration for consumers. Automakers typically aim for longer ranges to boost sales. On the other hand, increasing driving range typically implies larger batteries, increased resource needs and higher prices. In the long run, driving range is likely to plateau, as a market optimal vehicle range is reached and fast charging becomes more widely available.

Electric cars have not met similar success in all regions in the last decade. China, Europe and the United States account for nearly two-thirds of the overall electric car market and their aggregated sales represented 95% of total electric car sales in 2021. In large economies such as Brazil, India and Indonesia, EVs account for less than 0.5% of total sales, with some growth over the last years, albeit from low sales levels.

There were positive developments in 2021, however, possibly signalling stronger prospects. Electric car sales in emerging markets spiked to unprecedented levels in 2021: more than doubling in Asia to 33 000; in Eastern Europe, Central and West Asia to 32 000; and in Latin America and the Caribbean to 18 000. In Eastern Europe, Central and West Asia, this growth was led by BEVs, which accounted for about 65% of new electric car sales. In Latin America and the Caribbean, sales were more evenly split with PHEVs. Although electric car sales remained low across Africa, they increased by 90%, of which BEVs accounted for 85%.

Worldwide consumer and government spending on electric cars continued to increase in 2021. Consumer spending doubled to reach nearly USD 250 billion, about eight times what was spent five years ago. Government spending, such as through purchase subsidies and tax waivers, also doubled to nearly USD 30 billion. The resulting government share of total spending for electric cars remained at 10%, down from about 20% only five years ago.

In China, consumer spending nearly tripled to about USD 90 billion in 2021. Government spending also increased, doubling relative to 2020 levels to reach USD 12 billion. However, government spending on a per electric car basis decreased from about USD 5 000 to USD 3 750, in a declining trend since 2016 highs. The drop in 2021 reflects declining per unit subsidies and spiking sales.

Europe massively increased public spending on electric cars in the last two years. In 2019, public support for electric cars accounted for about USD 3.0 billion and levels have been rising steadily since 2016. In 2020, it more than doubled to USD 8 billion, and in 2021 it increased to USD 12.5 billion. Consumer spending similarly increased to USD 112 billion in 2021, resulting in a constant share of government in total spending since 2019 at about 10%. While government spending to support electric car uptake increased as a whole, the per unit support level remained flat in the range of USD 5 000 - 6 000 over the 2019-2021 period. This reflects two mechanisms that balance each other: increasing per unit subsidies in Covid-related stimulus packages; and tightening eligibility requirements for subsidies with a vehicle price cap (for equity considerations).

The global sales-weighted average price of BEVs in 2021 was just over USD 36 000, down 7% relative to 2020, and stable at USD 51 000 for a PHEV. However, these average prices are significantly skewed downwards by the market in China, which accounts for the highest sales and lowest prices. This is notably due to a stronger market position for small and medium models there, lower production costs and more integrated domestic battery value chains. Excluding China, the average BEV price was just under USD 50 000 in 2021, up 3% relative to 2020, and over USD 57 000 for the average PHEV, up 4%.

There are regional variations in terms of price differential between electric and conventional cars. In China, where electric models are smaller and less expensive on average, the price gap is narrower than in other major markets. We estimate that the sales-weighted median price for BEVs in China was only 9% higher than the overall car market, and that the average BEV was 20% more expensive than the average conventional vehicle, compared to about 45 - 50% in Europe and the United States for both metrics.

Globally, decreasing EV prices and increasing driving ranges in 2021 relative to 2020 have resulted in a 10% decrease in the sales-weighted average price-per-range ratio for BEVs and 14% for PHEVs. Excluding China, the drop was 7% for BEVs and an increase of 2% for PHEVs because average prices increased faster than the average range. The highest drop for BEVs was recorded in the United States (-8%), where the price dropped by 4% while the range increased by 5% on average. In Europe, while BEV driving range increased by 11% on average, prices also increased, resulting in a slower price-per-range decrease (-6%). 041b061a72


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