BYD versus Tesla - The global EV race heats up

EV industry

The EV industry is rapidly growing, driven by advancements in technology and rising environmental awareness. Chinese companies like BYD and Geely are leading the charge. They’re not only advancing in vehicle production but also dominating in battery manufacturing and charging infrastructure. With government support and subsidies, these companies have made electric vehicles more affordable for consumers.

Globally, China leads the world in terms of EV sales.

Source: https://www.iea.org/reports/global-ev-outlook-2024/trends-in-electric-cars

Major global players in EV manufacturing (2023 data)

Source: https://tridenstechnology.com/byd-sales-statistics/

BYD’s rise to the top

BYD aka ‘Build Your Dreams’ which started in 1995 by Wang Chuanfu making phone batteries, has grown into the world’s largest EV manufacturer.

In 2023, BYD sold ~3 million new energy vehicles (NEVs), which include both battery electric vehicles (BEVs) and plug-in hybrids (PHEVs), a 61.9% YoY increase.

In volume terms of BEVs alone, BYD managed to outsell Tesla in Q4CY23, delivering 526,000 BEVs versus Tesla’s 484,000 during the same period, marking the first time BYD beat Tesla in pure electric vehicle sales.

Let’s look at a few of BYD's strategic acquisitions and investments

BYD acquired a 77% stake in Xi'an Qinchuan Automobile in 2003 for HKD 269 million. This acquisition was key for BYD's entry into the automobile manufacturing sector, giving them access to car production technology and licenses critical for expansion into EVs.

Another important investment in 2020, was in lithium battery technology. BYD's expertise in lithium-ion batteries helped them develop their proprietary "Blade Battery" in 2020, which gave the company a significant competitive advantage in the EV market.

BYD’s business segments

Source: https://shorturl.at/xIxOm; *Percentage breakdown above is approximate and based on available information.

This diversification puts BYD in better stead to weather uncertainties while positioning the company as one of the major players in the global push for sustainability.

Trends in BYD car sales and production

Key factors that helped BYD achieve ~3.0 million units (including electric vehicles, hybrids, buses, and trucks) of sales in 2023 include: Overseas sales expanded by over 300%, driven by demand in Europe and Southeast Asia.

A diverse range of EVs and hybrids catering to consumer demand. Advances in battery technology reduce costs and improve efficiency. Government subsidies in China make BYD’s vehicles more accessible. It is worth noting that in 2024, BYD has already surpassed the ~1 million mark in pure electric car sales in 2024 alone.

Source: https://tridenstechnology.com/byd-sales-statistics/#h-byd-car-sales-by-year

BYD key financials (Fiscal year is Jan-Dec)

BYD's financial growth has been substantial, with revenue soaring from HKD 1,73,547 million in 2020 to HKD 6,54,121 million in 2023. EBITDA and net margins have also seen steady improvement. That said, volume growth seems to be surpassing value growth for the company, indicating that either the pricing or government subsidies are a big driver of growth for the company. Any change there, could impact sales.

Source:wsj

Popular BYD car models

Source: Company

BYD's vehicle lineup caters to a wide range of consumers, with the BYD Song being its best-selling model.

Source: https://shorturl.at/ZA73w

BYD vs Tesla: The battle for EV supremacy

Tesla, long dominant in the EV market, is now facing serious competition from BYD.

Source: press releases, news articles; *BYD sales include hybrids and EVs

While Tesla has focused on premium electric vehicles, BYD has gained traction with its lower-cost, high-volume approach, particularly in China, where it enjoys government subsidies. BYD controls ~35% of the Chinese EV market, compared to Tesla’s ~7.8%.

What gives BYD the edge?

BYD's in-house development of its blade battery, a safer and more cost-effective lithium iron phosphate (LFP) battery, gives it a significant edge over Tesla, which still relies on external battery suppliers. Additionally, BYD’s lower pricing strategy, combined with subsidies, has allowed it to capture a larger share of the market.

Tesla’s strengths

Tesla, however, has a broader global reach, with a strong presence in North America and Europe. Its higher profit margins (17-20%) per vehicle also surpass BYD’s. In 2023, Tesla delivered over 500,000 vehicles in the U.S. and 350,000 in Europe.

Global expansion and challenges

BYD is expanding globally, with entry into 15 European countries, and plans to grow further, targeting markets in Europe and Southeast Asia. However, it faces potential challenges in mature markets like Europe and the U.S., where brand loyalty and regulatory hurdles could pose difficulties.

Comparative financial analysis of Tesla and BYD

While Tesla remains the most profitable EV maker, BYD’s lower-cost alternatives are putting pressure on Tesla to reduce its prices. Tesla’s upcoming Model 2, aimed at budget-conscious buyers, may be crucial in regaining market share.

Source: Wall Street Journal

The BYD Han EV is considered a competitor to the Tesla Model S. Let’s look at how they compare:

Source: Press releases

Conclusion

The race between BYD and Tesla continues to heat up, even as legacy automakers like Volkswagen, BMW and Daimler strive to make their mark. Tesla’s innovation-driven strategy and upcoming low-cost model could shift the balance once again. At the same time, any change in China’s EV policies and subsidies could hurt BYD. BYD’s expanding presence in the global markets will also be a key monitorable that can drive future growth. That said, both companies continue to produce quality products that have given consumers multiple choices.