U.S. auto stocks: Who is leading the EV race?

A recent ICCT report, discussed by Bernstein Research, indicates Chinese automakers and Tesla continue to lead the global electric vehicle (EV) race across market dominance, technology performance, and strategic vision metrics, with BYD notably surpassing Tesla in global battery EV volume. U.S. legacy automakers, despite selective gains in technology, are largely lagging, evidenced by a stagnant national EV sales share of 9-10% and inconsistent strategic alignment, such as GM removing long-term EV incentives from executive compensation. Policy uncertainty in the U.S., including potential regulatory rollbacks, further poses a significant headwind, exacerbating the competitive gap for domestic automakers.

Analysis

According to a 2024 Global Automaker Rating from the International Council on Clean Transportation, a significant performance gap persists between global EV leaders and U.S. legacy automakers. Chinese firms and Tesla (TSLA) exclusively occupy the 'leader' category, distinguished by superior market dominance, technology, and strategic vision. Notably, BYD's 47% year-over-year increase in EV sales has allowed it to surpass Tesla in global battery EV volume. In contrast, U.S. manufacturers show limited progress, with the national EV sales share inching up from just 9% to 10% between 2023 and 2024. While there are selective technological gains, such as General Motors' (GM) improved charging speeds and green steel procurement efforts by both Ford (F) and GM, strategic execution appears inconsistent. Stellantis (STLA) stands out positively by increasing ZEV investment and maintaining strong links between executive pay and EV metrics. Conversely, GM has regressed in this area by removing long-term EV incentives from executive compensation. This competitive lag for U.S. firms is compounded by significant policy uncertainty, including potential rollbacks of EPA regulations and the Inflation Reduction Act, which poses a material headwind to their momentum.

Key Decisions for Investors

• Investors should critically assess the strategic divergence among automakers, favoring firms like Stellantis that demonstrate clear commitment through investment and executive incentive alignment, while viewing GM's removal of EV-linked compensation as a significant red flag.
• Given the intensifying competition, particularly from BYD which has surpassed Tesla in sales volume, positions in Tesla should be monitored for signs of eroding market dominance.
• The significant policy uncertainty in the U.S. represents a primary risk factor for domestic automakers, warranting a cautious stance on the sector until a clearer regulatory landscape emerges.
• Consider Ford's reiterated commitment to its battery investments, regardless of policy shifts, as a potential point of relative strength and differentiation among U.S. legacy manufacturers.