BYD, Tesla, and the Changing NEV Market

 

WSJ

There was an article in today’s Wall Street Journal, Tesla Faces Crowded Field in China as New-Energy Car Market Booms.  The market for new energy cars (NEVs), which includes battery electric vehicles (BEV) and plug in hybrid vehicles (PHEVs) is growing in China at an impressive rate.  At the same time Tesla year-over-year monthly sales in China declined for the first time.  Yes, the premier maker of electric cars is losing volume and share in the largest car market in world.  This doesn’t sound like good news for Tesla and the rest of the emerging electric car makers in the US.

Here are the facts.   Tesla sold about 32,800 cars in China in July 2021.  This year, Tesla sales dropped 14% to 28,217.  Three Chinese manufacturers outsold Tesla.  Geely sold 32,030 cars, SGMW sold 59,336, and at the top, BYD, with a whopping 162,214. 

Warren Buffet is a backer of BYD, which stands for Build Your Dreams.  BYD was founded in 1995 in Xian.  The automotive subsidiary was founded in 2003 and is headquartered in Shenzhen.  They built both gasoline and new-energy vehicles.  In March, they produced their last gasoline internal combustion engine vehicle.  They are focused only on new energy vehicles now.  And, to repeat, they are dominating the largest car market in the world.

Per the WSJ article:

Sales of new-energy cars have been doubling monthly for most of the past two years and they now account for 27% of the overall passenger-car market in China, according to data from the association. 

In the US, NEVs only account for about 10% of total vehicle sales.  We could be at 25% by 2025 per Bloomberg.  Where will the Chinese be by then?  Just using the same growth ratio, the Chinese NEV market could be 40%.

There was another WSJ article in January that reported that Tesla had either shelved or postponed new product development including an economic $25,000 BEV and their pick-up truck.  Meanwhile their competitors are developing pick-up trucks, SUVs, and more. 

It is almost like Ford in the early days of the automotive industry.  Ford made the Model T for everyman and the company dominated the market selling 15 million vehicles from 1909 to 1927.  It was the only model the company sold.  Ford was obsessed with manufacturing efficiency and not variety.  In 1909, he said "Any customer can have a car painted any color that he wants, so long as it is black."   GM under Durant created brands and segmented the market.  They offered variety and soon ate Ford’s lunch. 

Tesla only offers four models at this time.  Is Tesla on the brink for being overwhelmed with their competitors’ new products and variety of the rest of the automotive world is on the brink of launching?  Is what’s happening in China, a harbinger for what will happen in the US market?  There is certainly a parallel feel between Ford then and Tesla now and their iconic, innovative, and eccentric leaders.

BYD is making and selling EV buses in the US already.  When will they start selling the NEVs here.  It could be a big game changer.

 

WSJ