The coming car model apocalypse

S&P Global Mobility projects that what it calls peak car model complexity is rapidly approaching and that this is posing a dilemma to OEMs. The three propulsion systems (ICE, hybrid, and electric) are projected to reach near parity in new car sales by about 2028. Given the current OEM strategy of producing models of each type, the number of models (or Nameplates) should reach a maximum at about that time.


The increasing number of models is already having an impact. In 2018, sales per nameplate averaged 49,000 vehicles. This figure is projected to decline to an average of 36,000 per nameplate by 2027. This is a problem because the industry assumption has been that minimum sales of 40,000 per annum is required for a vehicle model to be profitable. The greater the number of models, the less efficient the production.

This may be mostly an American problem however. In Europe it appears that the increase in BEV models is being mostly compensated for by a decline in the number of gas models offered.

This shift will likely accelerate as plug-in hybrids will soon lose their low-carbon status in the EU and their eligibility for incentives. EU to change how plug-in hybrid CO2 emissions are measured

The times are changing pretty fast even with Tesla still the only company consistently selling electric cars for a profit.


When Tesla bears say that Tesla needs more variety, more models, more choices, they should consider the above!

2 million cars per year split between four models is a yearly average per model of… DRUM ROLLLLL


That’s how you put billions in the piggy bank.

The Captain


But that was when there were fewer other EV offerings by the competitors. It gets more dicey from here.

Yup. BYD and Tesla sell about the same number of BEVs. Tesla does it with four models and a ramping cybertruck. BYD has over 20 BEV models. Tesla sells it’s numbers at a significantly higher average selling price with higher profit margins. Yet it is Tesla’s business model that gets criticized. Go figure.

If the S&P Global projections are correct, then the ICE/hybrid pie is going get increasingly smaller. This means that the number of ICE and hybrid models will have to decline for economic reasons. Whether these will be replaced by an equal number of BEV variants remains to be seen, but I doubt it. BEVs are too simple from a hardware perspective to have many variants.

I suspect a mature automotive Tesla will produce small and large versions of a sedan, SUV, and pickup truck. There will be the next-gen platform that will serve as the robotaxi, with a variant becoming the Corolla-killer and the primary export model for the developing world. There may also be a van. Less than 10 models in all.

With Tesla’s recent announcements I suspect a significant Osborne effect this year. This probably means continued discounts on the Models 3 and Y. Fortunately COGS/vehicle has also been declining and will probably accelerate. The retreat of OEMs from BEVs and China’s economic slowdown has reduced battery demand at a time when battery manufacturing is aggressively expanding. This means that batteries and their components are cheap, all to the benefit of Tesla’s production costs. So while I expect Tesla’s revenues may decline this year, their profitability may be okay.


Yeah, because BYD dominates Tesla in BEV sales in China. Last year, BYD sold about 1.6 million BEV’s in China, compared to Tesla’s 0.6 million. That’s with all their hybrid models cannibalizing some of their BEV sales. BYD’s broader model diversity - especially offering cheaper models - lets it grab significantly more of the market than Tesla has. Gaining more of the market of course leads to lower ASP and (usually) lower margins - Toyota’s going to have lower metrics than Lexus, but higher unit sales, because “mass market” cars are cheaper. But if you want to be a major volume player in global auto markets, you have to push to expand your vehicle sales.

Tesla sells more BEV’s globally, because BYD has only just started to roll out in Europe and is barred by tariff barriers from entering the U.S. market. But in the largest market, and the one they both participate in at full volume, BYD blows the doors off Tesla both in BEV’s and EV’s overall in volume. Tesla doesn’t have to pursue volume at scale like BYD is, of course - plenty of money to be made without being at the top in unit sales - but Tesla’s stated goals of 50% CAGR in unit sales sort of require them to pursue a volume strategy.

Note that your graph above shows pretty much the same number of models existing after the BEV transition than before the BEV transition. IOW, they project there will be as many BEV models in 2035 as there were ICE models in 2019. That’s the opposite of what you’ve suggested from time to time - if that projection is true, it means that BEV’s won’t have changed things when it comes to models. Which means model diversity will remain important to being a major volume player.


BYD’s BEV average selling price is much lower than Tesla’s. I may be going out on a limb here but I suspect that is a much bigger factor accounting for BYD sales than the number of models.

That’s because all those models are coming from OEMs that are still stuck in the same ICE paradigm that you are in. That is the nature of mature technological products that are mainly mechanical in nature. The only way to differentiate is by changing the looks of the hardware.

Rotary phones were like that. All sorts of different sizes and shapes, from the princess phone to the one in Maxwell Smart’s shoe. That all changed when phones became computers and software-defined. Now they all look pretty much the same. Phones are differentiated less by how they look and more by stuff like the number of pixels supported by its camera.

They’re related. The reason that BYD’s ASP is much lower than Tesla’s is that BYD doesn’t just offer expensive cars. They also sell cheap cars. Which allows them to sell more cars.

But your thesis is that is going to change. That the reasons for model diversity disappear with EV’s, so consumers will no longer demand - and manufacturers will no longer have reason to make - different models. And that by the time BEV’s are 100% of the new car market (and actually long before that, if I read your comments correctly) the OEM’s will either have to recognize that or some (if not many) will be driven from the market. Because they won’t be able to sell BEV’s at a profit if they don’t adopt Tesla’s approach. Or that AV’s will rule the world, eliminating model diversity.

It’s just interesting that you would cite a document that says the opposite. That we won’t even start to see a reduction in model diversity within BEV’s even in 2036 - in a scenario where BEV’s are nearly 100% of the market. That kind of projection is far more consistent with the opposite position - that the reason we have a diversity of models is because consumers have a diversity of offsetting preferences for vehicle size, seating capacity, qualify of interior appointments, styling, attributes/features, and (above all) price. And that these factors will persist even into a pure BEV world.

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Tesla also lowers prices when needed, but instead of creating a new model with its own supply chain and production line, it just lowers the price of existing models. The only way BYD can compete with Tesla even in China is to price their large variety of models at a much lower average selling price.

The only reason BYD has higher sales volume in China is because Tesla is interested in making a profit selling BEVs. That puts a limit on how much it can lower prices. BYD is not so constrained.

That might be an argument if the OEM strategy was actually successful and that because of their variety of models they can profitably compete with Tesla. So far it is the opposite. The OEMs are selling their great variety of BEVs at a loss and even then, they find it hard to compete with the few Tesla models.

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Is that true? Tesla’s production has fallen, and it’s got unused capacity in Austin at Berlin. It’s no longer supply-constrained. If it could get unit growth just by lowering prices of existing models, it could do that. They haven’t chosen to.

They don’t have a $30K car. Even if they could lower the price of the Model 3 to $30K and turn a profit, they probably wouldn’t do that, because of how markets and pricing work. Since you can’t just sell some of the Model 3’s at $30K and charge $38K for the rest of them, the only way to get the $30K customers is to lower the prices for everyone. Automakers have historically and universally solved that problem by offering different models at different price points, so they can pick up consumers at price points that are too far away from each other to reach with just trim modifications.

Is that statement true? Is there any evidence that BYD loses money on their BEV sales?

After all, they’ve reached the point where more than half of their sales are BEV’s (1.6 million vs. 1.4 million PHEV’s). They’d have to have an absurdly high profit margin on those PHEV’s for them to not be earning money on their BEV’s - they earned a little under $6B in profit last year, which would be more than $4K profit per vehicle if it were just spread among PHEV’s. Even more if BEV’s lost money. Given their low ASP, they’d have an unthinkable profit margin in PHEV’s if they only made money on a minority of their vehicles.

It was. All of the high volume producers provide a wide variety of models. Sometimes they introduce entire new marks so that they can provide even more models without brand confusion (Lexus for Toyota, Acura for Honda). There are plenty of automakers with a small number of models, but they have relatively low volumes. They have model diversity so that they have an offering for nearly all consumers, and consumers want different things - most of which are unrelated to drivetrain or engines. Consumers want city cars, subcompacts, compacts, small sedans, midsize sedans, large sedans, coupes, hot hatches, compact SUV’s, crossover SUV’s, small SUV’s, midsize SUV’s, large SUV’s, convertibles and rag tops, small pickups, medium pickups, large pickups. For many of those segments, some consumers want luxury versions, some want bare-bones versions, and some want an intermediate versions. Within every segment, consumers have different preferences for styling - and sometimes different consumers in different countries want different appointments or features.

Large automakers respond to this by offering lots of models. Sometimes within the same market - Toyota motor company offers six different sedans in the U.S. (Camry, Corolla, Prius and the Lexus IS, ES, and LS). Sometimes in different markets (in Europe, Toyota also offers the Yaris and Aygo, which are too small to appeal to U.S. customers).

Tesla hasn’t had to do this. Until recently, there were so few compelling offerings that people that might prefer a BEV sedan that was smaller/cheaper than a Model 3 (or that was bigger than a Model 3 but cheaper than a Model S) might just bite the bullet and trade off that preference for what was available. But once there’s a plethora of choices out there, they don’t have to make that trade-off - they can find a car that’s a better match to the size and price point they’re looking for. There’s only so much of the market that wants exactly the size and configuration of a Model 3 or a Model Y.

So someone in Europe who wants/needs a small car - an A- or B-segment along the lines of an Aygo or a Yaris - isn’t likely to buy a D-segment sedan like the Model 3. But if BYD comes along with the Seagull…well, then they’ve got that customer and Tesla doesn’t.

Name me any other car manufacturer that does not already do this (and has for decades!). Dealer incentives, regional pricing through dealer networks, etc. The big difference: Tesla cannot do this on a geographic basis, its all or nothing.


I seem to recall a “California only special” a few years ago. Why can’t they vary price by region if they wanted to? (I know they don’t want to right now)

And for the few cars that they happen to have in stock at their service/sales centers, there are definitely slightly lower prices on those if you are lucky enough to live near a place with availability.

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