BYD Edges Toward Surpassing Tesla as the Leading Electric Car Company Globally
BYD surges ahead in the electric car market, boasting record-breaking EV sales in 2023 With Tesla in its sights, the Chinese company edges closer to becoming the industry's global frontrunner
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In 2023, China's BYD set a new sales record for electric vehicles, edging closer to surpassing Tesla as the world's market leader.
Last year, the Chinese company saw a 62% increase in global sales, selling just over three million units compared to 2022, as reported in a stock exchange filing. BYD's sales included 1.57 million battery electric vehicles (BEVs), marking a 73% increase, and 1.44 million hybrids, which were 52% higher than the previous year.
Tesla (TSLA) is set to release its full-year sales numbers as soon as Tuesday. Analysts anticipate that the US EV manufacturer has likely achieved its annual delivery goal of 1.8 million BEVs. It exclusively sells electric vehicles and not hybrids.
In 2022, BYD fell behind Tesla in global BEV sales by approximately 400,000 units. However, the gap is anticipated to have narrowed in the past year. There are even suggestions that in the latest quarter, BYD may have surpassed Elon Musk's company.
BYD reported sales of 526,409 BEVs in the fourth quarter, marking a growth of over 20% compared to the previous quarter. In the same period, Tesla is estimated to have delivered 473,000 units, as per a Reuters poll of 14 analysts. The significant expansion of BYD, supported by Warren Buffett, reflects the ascendance of China's electric vehicle sector.
China is rapidly advancing its shift towards electric vehicles, benefitting from robust government backing for the industry. Beijing has established a goal for at least 20% of yearly new car sales by 2025 to consist of new energy vehicles (NEVs), such as BEVs, plug-in hybrids, and hydrogen fuel cell vehicles. The government aims for NEVs to become the dominant choice for new car purchases by 2035.
The first goal was achieved in 2022, about three years early. The second may also be reached earlier than expected.
BYD cars waiting to be loaded onto a ship at the international container terminal at Suzhou Port, in China's eastern Jiangsu province, on September 11, 2023.
AFP/Getty Images
From January to November 2023, sales of new energy vehicles reached 8.3 million units, representing over 30% of total car sales, as reported by the China Association of Auto Manufacturers last month.
Miao Wei, former minister of China's Ministry of Industry and Information Technology, projected at a car forum in November that the government's goal of achieving 50% penetration of NEVs by 2035 is expected to be met by 2025 or at the latest, 2026, as stated by state media sources.
Analysts attribute China's prominent position in the global industry to its market size, low-cost labor, and supply chain dominance. "China is taking the lead in production and expanding its competitive advantages, capitalizing on its large domestic market and first mover advantage," stated analysts from Natixis Asia, a French investment bank, in a report released in late November.
Chinese EV makers have been able to easily expand both in their home country and abroad thanks to their first mover advantage and government support in the form of infrastructure investment and subsidies. Despite this, a fierce price war and increased competition have negatively impacted the profit margins of numerous car makers.
An aerial view of Tesla's Gigafactory on March 29, 2021 in Shanghai, China
Amid a slowdown in China's economy, automakers became worried about a decrease in demand. In response, Tesla lowered its prices in January to entice customers and counter the slowing growth, sparking a price competition. This move led to numerous other car manufacturers also reducing their prices to remain competitive in the market.
The price battle has increased sales, but it has put industry-wide profitability at risk. According to the Chinese Passenger Car Association, a government-supported industry organization, China's car industry only recorded a profit margin of 5% for the first 11 months of last year, a decrease from 2022's 5.7% and 2021's 6.1%. To counteract the sluggish domestic market, Chinese car manufacturers have been pursuing growth in Europe, Australia, and Southeast Asia.
Last month, BYD announced it would build an EV factory in Hungary, which would be its first passenger car plant in Europe. It already has a bus factory in Komárom, Hungary.
