Tesla and BYD clash for top spot amidst dismal earnings and economic headwinds

Electric Vehicles (EVs) came into the limelight as a beacon of hope and sunshine to promote green energy, enabling many to cut down on their vehicle emissions, but now the sector is facing many challenges. Though, BYD and Tesla’s conflict, both darling in this EV market looks interesting they too are facing a host of challenges. 

Tesla has seen rapid devaluation in terms of net worth and has been seeing a rapid decline in their stock prices. BYD though managed to beat Tesla in the last quarter (2023 Q4) on  EV sales by selling 526,000 cars in comparison to its former rival’s 426,000 cars, BYD’s factory expansion plans have hit a roadblock as well. 

The company expected to open a factory in Mexico, a hitherto backdoor entry to the US streets has had to face calls of a boycott championed by automaker’s advocacy group  alliance for American Manufacturing (AAM). A host of issues seem to plague the EV sector. Let us know more about these issues in detail.

EV market faces challenges

EV companies are not doing well and that’s evident with the struggling market scene. Yes, its sales have been peaking in countries like the US, but still, many EV manufacturers are reporting losses. Some of these companies are taking additional measures now to reorient their focus back on gasoline vehicles or doing a large layoff of the workforce. Companies are spreading thin and do not have enough capital to expand into more geographies, so some are even halting on taking these measures.

As per a news piece put out by Forbes on 23 Feb 2024, Rivian Automotive an EV Company despite seeing a 167% growth in revenue of year-on-year growth in 2023 saw a GAAP (Generally Accepted Accounting Principles) net loss of $1.308 billion which is $1.36 per share. Facing the strain of the market the EV maker tried taking control of the situation by focusing on better profit margins, cutting production costs, etc, but mainly it fired 10% of its workforce to manage the cost of production expenses. After that, for a significant period, the shares of the company saw a downfall.

Among other companies, as per the Forbes report, Ford scaled back on the production of the F150 Lightning Pickup Truck to adjust to the market downfall. Mercedes Benz decided to provide massive discounted rates to sell off their existing fleets. General Motors (GM) has decided to delay their launch of cars adjusting the production costs. Honda and GM came together to produce a convenient EV, but that deal went down the drain because of the existing market sentiments.

Lucid Motors, another major EV company had decided to cut up costs on its electrical sedans. This happened in the wake of the company’s disappointing sales figures in 2023, the company only managed to deliver 6001 cars as opposed to the expected 90,000, after producing 8000 cars in that year. Lucid Motors is expected to launch its price-efficient car which is the base model of Lucid Air Pure and its price has been reduced from $80000 to $69900.

As per a piece written on globalvillagespace.com, Swedish Electric motorbike maker Cake is facing bankruptcy, their US headquarters has been acquired by a Florida-based retail outlet. Faraday Future another EV maker owes $1 million in rent for its Los Angeles startup.

In the US, other major developments have resulted in the slowdown of the EV market. The Govt that offered earlier tax incentives of $7500 has significantly been cut. This is making EV cars more costlier when compared to combustion engine cars by 5.5%, Geographical and climatic factors also have affected the market demand. In 2023, one of the coldest winters in Northern US saw a shortage of Charging stations. There were abandoned EVs found in charging stations unable to get charged. 

Photo of the BYD Tang EV CRI
(Source: https://commons.wikimedia.org/)

Competition amidst EV companies

Some reasons and specificities are outside of the economic factors in character including infrastructural challenges responsible for the EV market’s lackluster performance, or even geographical and climactic factors, but there are some reasons internal to rivalries and competitiveness that have peaked some EV makers above the rest. For example, Chinese companies are quashing Europe’s traditional carmakers on both EV and traditional vehicles on their home turf.

The Geneva Car Show which will return after a 4-year hiatus shows media hostings of 3 companies mainly BYD and SAIC from China and France’s Renault. Renault is expected to launch its R5 EV, along with SAIC will launch its M model EV M3 Hybrid. BYD’s Seal Sedan is the car of the year awardee at the Car show.

As per a report by the VOA (Voice Of America) on 24 Feb 2023, Nick Parker partner at Alix Partners, compared Chinese and European carmakers to chalk and cheese. He told the news portal that both of them do not complement each other, The Chinese counterpart can undercut major production costs as they can make every car part as opposed to European car makers. Nick as an example gave the example of BYD’s Electric Dolphin Hatchback which costs 25,490 pounds, 27% cheaper than Volkswagen’s ID3, The same can be said when compared to Tesla’s EVs.

TESLA logo

(Source: www.tesla.com/)

Tesla and BYD fight for the top spot in the EV market

Automakers and EV makers were awestruck, almost bewildered when BYD managed to beat Tesla in Q4 sales of EVs. In a report by investors.com, Tesla delivered 484,507 EVs compared to analysts 480,463 figure. Tesla managed to sell 1.81 million EVs as opposed to the presumed 1.8 million figure by Analysts in 2023 for the entire year. BYD on the other hand reported 3.018 million in total sales including plug-in hybrid EVs more than the 3 million projection, of which 942,779 was in Q4 sales. Among the total sales, BYD managed to sell 526,409 EVs as opposed to the previous quarter’s 431,603. This made BYD lead The Q4 sales of 2023 in the EV sector.

In this ripened BYD vs Tesla war, Waren Buffet’s Hathaway Berkshire-backed BYD is getting ahead of Tesla, as per a Yahoo Finance report on 26 Fen 2024. BYD is not just a low-cost EV manufacturer now. It is expanding its stock size and making more cars than expected for all price tiers. BYD’s luxury models are gracing the EV market, including the coveted Yangwang U9 which boasts that it can reach 100 km/hr (625 miles/hr) in 2.6 seconds. Its top speed setting is 329 km/hr. It can also spin and enter dance mode. By looking at the car’s features, it seems as if it has been made to compete with the likes of Lamborgini and Ferrari. Along with this luxurious car, BYD has also launched a renewed cheaper Dolphin hatchback that the company managed to sell 367,419 of them in 2023. Its starting price now is $13,865.

Tesla though getting quashed by BYD, the latter is also struggling in selling its cars due to the constant intervention of trade rights activist groups and local bodies advocacy groups calling for a ban on the sales of cheap Chinese cars as they put it which is destroying their homegrown companies. BYD despite its global expansion sees a very low growth rate in sales on its home turf.

An investors.com report tells us that Tesla is now reducing the prices of Model Y vehicles to fight rising competition with BYD. It has been giving out discounts, and incentives to boost sales, they reduced the prices of vehicles from the Model Y series in January, and they increased the price slightly again on 12 Feb 2024 in the European market. Tesla increased the Model 3 EV price by $1000 in the US. It decreased the price of Model Y EV vehicles in the US. Tesla has also launched an updated Model 3 model of Tesla in China.

Many years ago, when Musk was asked about BYD he laughed it off by saying they made cheap cars. Just a few months back in December 2023, Musk stated in the press that if there were no tariff rates, Chinese vehicles would demolish any EV or Automobile maker in the world. With the fight for the crown still underway between these two giants who laugh will be interesting to watch. 

BYD Dolphins parked together in a line in Pudong Shanghai
(Source: https://commons.wikimedia.org/)

Conclusion

EV as a sector is growing, but the companies are still not getting the expected profit. Many companies have opted for late launches, offering incentives and discounts to sustain the slowdown. Amidst this TESLA and BYD are having a fight of their own to race and reach the top. TESLA is incorporating methods to sustain at the top. BYD is facing a slowdown in expansion, due to protests by advocacy groups, and unions, as it expands its footprint globally acquiring global manufacturing plants and showrooms.