Tesla's Price Cuts Benefited BYD

With its March figures, BYD Company Limited (OTC: BYDDY) showed staggering growth in EV sales, officially making the Chinese EV giant the world’s second biggest EV manufacturer that is rapidly catching up to the industry leader and EV pioneer, Tesla Inc TSLA. Despite being a generally slow month for automotive sales across the globe, BYD’s March sales were almost double compared to last year’s March, allowing the Warren Buffett-backed EV maker to shake off the impact of a bruising price war with the group also reporting a more than 400 per cent rise in net profit for 2022 that amounted to $2.4 billion.

Topping Volkswagen

Last Wednesday, BYD reported an 11-fold increase in fourth quarter profit of $1.06 billion as it expanded its range of products and dethroned even Volkswagen AG VWAGY as the stop-selling brand for the second month this year in February. The gross margin for automobiles that made up 77% of the company’s 2022 revenue has impressively increased from 2021’s 3.7% to 20.4%.

Gaining Market Share In China

Despite following Tesla’s move of cutting prices to defend market shares amid weakening demand, BYD is among the few who have gained market share. For the first two months of 2023, BYD made up 41% of new energy car sales in the world's biggest auto market while Tesla was far behind with a share of 8%. It is important to note that unlike Tesla who sells globally, BYD is mainly present in China.

A Tightening Race With Tesla

When it comes to battery-powered vehicles, BYD has twice as much market share in China than Tesla. It is certainly narrowing the gap in all-electric vehicle sales as during the first quarter of 2022, Tesla delivered 2.2 times vehicles than BYD while in the first quarter of 2023, the ratio melted to 1.6 times.

In March, BYD delivered 206,089 electrified passenger vehicles that consisted of 102,670 all battery electric vehicles and 103,419 plug-in hybrid models. The figure translates to an increase of 98% from the 104,338 delivered in March 2022. 

For the first quarter of 2023, BYD delivered 264,647 all-electric vehicles, which is 85% more compared to last year’s comparable quarter and 283,270 plug-in hybrids, which is an increase of more than 100% compared with the first quarter of 2022. Meanwhile, Tesla has produced 440,808 vehicles during the first quarter of the year which translates to a YoY increase of 44 per cent.

Tesla still sells more battery powered EVs, but BYD sells more electrified vehicles overall.

The biggest difference is that Tesla is considered as a luxury brand while BYD is all about affordable EVS. However, although they are not competing directly now, Tesla is working on developing a more affordable EV that should be on the road by 2025.

Tesla’s Price War In China Backfired

In an effort to reclaim lost market share in China by slashing prices, Tesla has possibly helped Chinese carmakers to sell more vehicles than their foreign rivals for the first time. Automobility data showed that last year, Chinese carmakers made up 47 per cent of total passenger vehicle sales.

Moreover, the first months of the year showed that Chinese consumers favor BYD's cheaper and newer models. The Shenzhen-based group made up 40 per cent of EV sales in China while that Tesla share of plug-in hybrids an EVs dropped to 7.8 per cent.

BYD’s vertically integrated structure makes the company well-positioned on the industry’s shift to electrification with chairman Wang Chuanfu expecting first-quarter sales to skyrocket 80 per cent YoY with weak competitors being eliminated from the picture.

All in all, BYD is sitting in a sweet spot 

Despite not having Tesla’s global brand recognition, BYD is an established EV player and the word’s largest EV company by total volume sold. Its last year EV sales of 911,141 units with hybrid sales of 946,238 translate into YoY growth of more than 200% which is well ahead of everyone else, including Tesla and Volkswagen.

2023 Will Be A Big Year For BYD

Reuters reported that a day after revealing robust profits in 2022 and beating Volkswagen as the top selling brand in China, BYD's Chuanfu told reporters in Hong Kong that BYD's large scale protects the company’s strong profit margins, even in the current environment shaped by price wars and disappearing EV subsidies, as it strives to become the largest carmaker in China by the end of this year.