Since 2021, BYD and Tesla have left other global car manufacturers far behind and dominated the EV sales market. While Tesla maintains an absolute advantage in BEVs, BYD adopts a two-pronged approach by having both BEVs and PHEVs in the market, and the total number of vehicles sold last year surpassed Tesla by a large margin. After the first quarter of this year, BYD sold 550,000 units in total, a significant increase of 92% compared to Q1 last year. Even if the ICE car models of joint ventures are included for comparison, BYD remains the undisputed top brand in the Chinese car market. On the other hand, Tesla sold 420,000 vehicles globally in the first quarter, a 44% increase from Q1 last year and a new high for quarterly deliveries. However, unlike BYD, Tesla almost entirely relies on the Model 3 and Model Y to dominate the market, while BYD uses a dense product line to cover different market segments. Tesla sells extensively in major car markets worldwide, as BYD still struggles to expand beyond the Chinese domestic market, selling only over 20,00 units overseas in the first quarter of this year (as there is still no overseas factory). Moreover, the European market, where BYD’s sales channels are the most deeply established, still hasn’t captured the hearts of European consumers. If we observe various global markets, there are several key points to consider:
- Tesla is widely building vehicle assembly factories worldwide, which, although requiring significant initial investment, the company can enjoy tax and sales subsidies from local governments in localized production operations, thereby gaining superior price and cost-competitive advantages. Moreover, this can shorten the time from ordering to delivery, solving the largest pain point of the current imbalance between order intake and delivery for many car manufacturers. Currently, Tesla has factories in the United States, China, and Europe and will further deepen its presence in Asia, encompassing the world's major EV industry hotspots. In contrast, BYD's production plants are currently limited to mainland China, with its previously invested and constructed factory in Thailand scheduled to start production next year. Recently, BYD has set its sights on Ford's old plant in Brazil, which, if all goes well, can be purchased and rebuilt, but it is estimated that production will not begin until after 2025. As for the US market, setting up a factory is difficult due to US policy. As for the other major EV market, Europe, it is not yet clear whether BYD's first factory will be in Germany or Spain, and it will take some time to decide. Therefore, the production time is unlikely before 2025. The delay in localized operations in the two major markets of Europe and the United States may hinder BYD's continued growth momentum in the next three years.
- In the other two major domestic car markets, India and Japan, EV sales are still in the initial stages. However, the economic powerhouse, Japan, with the recent strategic adjustments of its government and leading carmaker Toyota, is about to fully promote the EV industry and charging ecosystem. Once Japan starts, the domestic market will undergo a qualitative change. In the Japanese car market, where foreign car brands have always found it difficult to survive and grow, the advent of the EV era will give foreign brands the best opportunity to enter and satisfy consumer demand ahead of Japanese car manufacturers. BYD and Tesla currently have sales channels set up in Japan, but the key to victory in the future may not only be product and pricing, but more importantly, the strategy for building charging piles and alliances with charging companies. Whoever does it faster and more completely will be able to get a larger share of the market. As for India, if we set aside the complex international political factors, I believe BYD has a better chance of considering setting up a factory there and introducing its most economical small cars to seize the opportunity in the electric vehicle market earlier. This may be the most crucial overseas single market for BYD to turn the tide from falling behind Tesla in the European and American markets.
Additionally, from product design, pricing, and profitability perspectives, BYD focuses on its EVs’ convenience and high cost-performance ratio as it transitions from producing traditional ICE cars to EVs. As a result, its gross profit margin is not particularly high. However, most of BYD's critical components are self-made or controlled completely, which gives the company strong cost competitiveness and supply chain resilience, which is particularly important in the EV industry. On the other hand, Tesla starts from a tech-focused experience and takes a different approach from traditional carmakers to challenge the acceptance of technology enthusiasts and younger generations. No matter how controversial this challenge gets, it has been successful in the sales market, and its OTA functionality brings high profitability through "after-sales resale," giving Tesla more confidence to engage in more intense price wars in the future than BYD. Overall, we shall see BYD continue its conquest of the Chinese market in the next two years. But after 2025, as traditional carmakers launch new EV platforms to compete, Tesla will firmly establish itself in Europe and America and continue to pressure brands with insufficient product strength to exit the market through price wars. At this point, BYD must set up a layout for entry-level EVs in India, Central and South America, and Southeast Asia. Additionally, the company needs to advance its technological research and development to enter higher-end product segments; otherwise, the impact on its sales from new EVs produced by traditional carmakers will be higher than that of Tesla.