Chinese company BYD has taken a step closer to dethroning Musk’s Tesla as the world’s best-selling electric vehicle manufacturer. The company announced on Monday that it sold a record 526,000 electric vehicles in the last three months of 2023, with 70 percent of sales occurring in December. They added that over 3 million electric and hybrid vehicles were sold throughout the year, of which 1.6 million were electric vehicles.
Musk stated last January that Tesla had the potential to achieve 2 million deliveries in 2023, but has since warned that higher costs are putting pressure on demand for his company’s cars, so the target has been reduced to 1.82 million vehicles sold. Meanwhile, Tesla also announced its results for the last three months, showing that the company delivered 484,507 vehicles compared to analyst estimates of 473,253 vehicles. The fourth quarter was about 11 percent better than the third quarter, which, as the company stated, contributed to the set sales target of 1.82 million vehicles.
In terms of vehicle brands, Tesla delivered 461,538 Model 3 cars and Model Y SUVs, along with about 23,000 of its other models.
Looking at the entire year, Tesla still outperformed BYD, as BYD sold 1.57 million electric vehicles last year (2023), a significant increase of 73 percent compared to the previous year, along with 1.44 million hybrids sold. This means that Tesla’s gap compared to the Chinese rival, at around 230,000 units in 2023, was significantly smaller than the 400,000 units reported in 2022.
Battery Advantage
BYD’s CEO Wang Chuanfu co-founded the company with his cousin in Shenzhen in 1995, and the company gained fame as a manufacturer of rechargeable batteries used in smartphones, laptops, and other electronics, competing with more expensive Japanese imports. It began selling its shares on the stock market in 2002 and diversified by acquiring the struggling state-owned car manufacturer, Qinchuan Automobile Company. Analysts say that BYD owes its growth to its original business – batteries. They are among the most expensive parts of EVs, and manufacturing them ‘in-house’ saves BYD a lot of money while other electric vehicle manufacturers rely on third-party manufacturers for batteries.
It should not be forgotten that there is strong support from the Chinese government for the industry. Namely, Beijing has set a goal that at least 20 percent of new cars sold annually by 2025 should be new energy vehicles (NEVs), which include BEVs, plug-in hybrids, and hydrogen fuel cell vehicles. By 2035, the Chinese government says, NEVs should become ‘mainstream’ in new car sales.
In the first 11 months of 2023, 8.3 million units of new energy vehicles, or NEVs, were sold in China, accounting for more than 30 percent of total car sales, according to data released last month by the China Association of Automobile Manufacturers.
Miao Wei, former minister of the Chinese Ministry of Industry and Information Technology, said at an automotive forum in November that the government’s NEV penetration target of 50 percent by 2035 is likely to be achieved by 2025 or at the latest by 2026.
Price War
China’s leading role in the global electric vehicle industry can also be attributed to its market size, cheap labor, and dominance in the supply chain, analysts claim. With state support and subsidies, Chinese manufacturers have been facilitated in expanding into both domestic and foreign markets, they add.
However, intensifying competition and a brutal price war last year affected the profit margins of many car manufacturers. As the Chinese economy lost momentum, car manufacturers were concerned about slowing demand. In January, Tesla lowered prices in China to attract customers and halt the slowdown in growth, triggering a price war. Dozens of car manufacturers followed suit to remain competitive.
The price war increased sales but threatened the profitability of the entire industry. In the first 11 months of last year, the Chinese automotive industry recorded a profit margin of only 5 percent, down from 5.7 percent in 2022 and 6.1 percent in 2021, according to figures released last week by the China Passenger Car Association.
To compensate for the slowdown in the domestic market, Chinese car manufacturers sought growth outside the mainland by expanding into Europe, Australia, and Southeast Asia. Last month, BYD announced that it would build an electric vehicle factory in Hungary, which would be its first passenger car factory in Europe, while it already has a bus factory in Komárom, Hungary.
