U.S. Markets closed

Tesla's US market share was 'probably close to peak' in 2020: Analyst

Tesla's (TSLA) record-setting share price rally in 2020 coincided with what may have been an all-time high in the company's share of the U.S. electric-vehicle market, according to at least one analyst.

"In the U.S., [Tesla has] more than quadrupled their market share in the U.S. electric vehicle market over the last five years," Garrett Nelson, CFRA analyst, told Yahoo Finance Live on Monday. "But we think their market share is probably pretty close to a peak in 2020."

"They just haven't had the competition, and they've really benefited from that. That will be changing very soon. In fact, in the next six months or so, you will see Lucid and Rivian vehicles on the road. You will see a number of new models from traditional automakers in electric vehicles on the road as well. So it's really the increased competition [that] has us cautious on the stock here."

With competition in the electric-vehicle space starting to heat up, the surge in Tesla's stock price will likely be difficult to maintain, Nelson added, especially following the stock's 2020 run-up of more than 700%. CFRA rates Tesla shares as Hold.

And in addition to smaller U.S.-based upstarts like Lucid and Rivian, a number of major automakers have also been pushing more fervently into the electric-vehicle space. General Motors upped its planned investments into electric and electric-autonomous vehicles to $27 billion in November, up from the $20 billion planned before the COVID-19 pandemic. Other legacy automakers from Ford to Daimler and Volkswagen also already have a number of electric vehicles available for purchase in the U.S.

At the same time, however, some other analysts have maintained that Tesla's future growth is likely to come increasingly from market share gains internationally, and especially from China, the world's largest electric-vehicle market. Wedbush analyst Dan Ives has called growth out of China a "linchpin" to Tesla's success, and believes the company is on pace to have about 40% of its deliveries come from China by 2022 especially as its Shanghai Gigafactory continues to ramp production of the Model 3 and Model Y vehicles.

The company logo is pictured on a Tesla Model X electric vehicle in this picture illustration taken in Moscow, Russia July 23, 2020. Picture taken July 23, 2020. REUTERS/Evgenia Novozhenina
The company logo is pictured on a Tesla Model X electric vehicle in this picture illustration taken in Moscow, Russia July 23, 2020. Picture taken July 23, 2020. REUTERS/Evgenia Novozhenina

Safety investigations

The latest concerns around the safety of Tesla's vehicles also presents a near-term risk to the stock, according to Nelson.

On Monday, the National Highway Traffic Safety Administration and National Transportation Safety Board each said they would investigate a crash involving a Tesla Model S vehicle in Texas on Saturday. Two people were left dead, and no one appeared to be in the driver's seat, according to preliminary reports citing local officials.

Preliminary investigations suggested it was unclear whether Tesla's autopilot driver assistance feature was engaged during the crash, or whether the vehicle was equipped with the company's newer Full Self-Driving capability. However, Tesla CEO Elon Musk wrote in a Twitter post Monday afternoon that "data logs recovered so far show Autopilot was not enabled" and the car did not purchase Full Self-Driving.

"We know that any time a Tesla vehicle is involved in a high-profile crash such as this one with very suspicious circumstances, it garners a lot of attention," Nelson sad. "And there's a lot of scrutiny surrounding Tesla because of their autopilot technology, because of some of the claims that Elon Musk and the company make surrounding the technology."

Tesla has cautioned on its website that its current autopilot features "require active driver supervision and do not make the vehicle autonomous." However, some safety experts and lawmakers have criticized the company over the autopilot and full-self driving nomenclature, noting that the terms may mislead consumers about the vehicles' capabilities and shortcomings as the technology continues to be built out.

"One thing I would say is that there have been many probes into Tesla crashes in recent years. In fact there have been 28 NHTSA probes, and 24 of those probes are still active, so one of the things we've seen in recent years is a reluctance to really clamp down very hard on Tesla," Nelson added. "We'll see what happens with this. I would say the significance of this is that it's the first major incident under the Transportation Department of the new administration, so we'll have to see where this goes."

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

Read more from Emily: