Tesla, Inc.'s (TSLA) early mover advantage has given the company a head start in the EV arena. However, the company may not be able to sustain the big lead it started out with, according to a new report.

Tesla's Shrinking Lead

Tesla held a 15% share in the global EV market in the first half of 2021, data from market research firm Canalys showed. The data includes both battery EVs and plug-in hybrid EVs. This represents a decline from the 16% share in 2020 and the 16.2% share in 2019.

Volkswagen AG (VWAGY) has made serious inroads into the EV market. From a mere 3.7% in 2019, the German automaker increased its share to 13% in 2020. The market share has held steady in the first half of the year.

SGMW, the combination of Chinese state-owned automaker SAIC, General Motors Corp. (GM) and Wuling, took the third position in terms of market share. The combo commanded 11% of the market in the first six months of the year.

The success story of the trio is premised primarily on the strong uptake of the Hongguang Mini EV in China. BMW (BMWYY) and Stellantis N.V. (STLA) each held 6% market share.

Tesla's Pushbacks

Tesla continues to dominate in the U.S., boasting 79% of the overall market in 2020. In the first quarter of 2021, the market share dipped to a still commanding 71%, according to estimates by Anglo-Irish data and analytics company Experian. The Top 2 EV models sold in the U.S. in the first quarter were Tesla's Model Y and Model 3, respectively.

Tesla, however, has ceded share to rivals in the European market, Canalsys said in the report. The company had a dominant position in the continent in 2019. Volkswagen and Renault SA (RNLSY) have since then stolen the company's thunder.

In 2020, Tesla's share of the European market was 13%, Barron's reported, citing Matthias Schmidt, which publishes the European Electric Car Report. Tesla has lost further ground since then. For the January-June period, the company took the fourth spot, as its market share dropped off to 6.8% compared to 11.2% for Volkswagen, 8.8% for BMW, and 8.7% for Daimler AG's (DDAIF) Mercedes.

China is a key market for Tesla, and to capitalize on the strong market potential and its own competitive positioning the company has built its production base there.

For the January-May period, SGMW led the Chinese plug-in EV market, with a 19% share, CleanTechnica reported. Warren Buffett-owned BYD Company Limited (BYDDF) followed with a 13% share. Tesla's 12% market share placed it at a close third position.

Intensifying rivalry in the global EV industry, both from legacy automakers branching out into green energy vehicles and pureplay EV startups, does not bode well for Tesla. With countries planning to phase out ICE vehicles gradually, it is quite logical that traditional automakers plunge headlong into the EV arena.

Tesla is also facing company-specific issues. Safety concerns surrounding its autonomous driver assistance system recently led to a probe initiated by U.S. regulators. In China, the company had to face the wrath of users earlier this year and also a recall of domestically sold vehicles due to quality issues. The Chinese government has banned Tesla vehicles from sensitive military compounds for fear of cameras used in its vehicles would be used for spying.

The communist regime in China is likely to stand behind local EV companies and help them dominate the domestic EV industry, according to Ark Invest's Cathie Wood. Additionally, there are fears that Tesla may lose focus amid noises such as Bitcoin (BITCOMP) investing and the recently announced Tesla Bot.

Tesla's ability to maintain leadership position in the long run hinges on how well it can execute on its strategies by staying focused and differentiating its products from the competition.