If you know the global EV industry well enough then you would understand there is a good
argument that BYD is Tesla's biggest competitor.
They make the most global EVs after Tesla.
BYD is at an annual run rate of nearly one million.
Of course before you comment I am fully aware that this number is bogus, as only about half
of them are true BEVs like Tesla, and the remainder are of course plug in hybrids.
But China came up with the acronymn NEV, or New Energy Vehicles, so China can look like
they are doing better in the EV industry than they actually are.
Tesla is at a run rate of nearly 2 million now, which is twice as many global EVs as
BYD and 4 times as many BEVs.
Nonetheless BYD have certainly surprised us.
Back in the day, around 5 years ago, it looked more like NIO would be the competition to
come out of China, copying a similar business model to Tesla, and benefiting from all the
low cost, efficient manufacturing out of China, even before Tesla.
If you looked at what BYD was producing back then, the vehicles were laughable, or at least
Elon Musk laughed at what they had against Tesla in an interview.
They certainly didn't look sexy, or safe for that matter, and offering minimal range.
I can only imagine how bad they might have driven.
However, BYD kept making more and more models.
Refining and improving what they had learned from the last, each time incorporating new
manufacturing techniques, the latest technology, and better cells and batteries, along with
copying where Tesla was headed too.
With each new iteration came drastic improvement.
BYD eventually worked out that it would be beneficial to make in-house cells, and they
understood the value of Tesla's battery day creating cell to vehicle batteries, using
the cells as the structure in order to save weight.
In China it is a lot easier to produce LFP cells, as all the local knowledge and skill
set is there.
LFP cells are far easier to manufacturer than the higher energy dense nickel cells.
So BYD got started on researching and developing in-house cells, and they came out with the
Blade cells, giving a structural battery pack.
Yes, BYD beat Tesla to the structural battery pack in volume production.
Hence why you will hear this as an argument from Tesla bears, particularly if they have
a position in BYD.
As a result BYD's Model Y competitor the Atto 3, does have a similar range to Tesla's RWD
Model Y.
BYD caught up.
Of course BYD don't have the same acceleration, cabin space, cargo space, features, self driving,
safety, reliability, handling, etc.
It is a vastly inferior vehicle, having driven one myself.
I mean it is lower cost to the consumer too.
Although I am not entirely sure if BYD are producing them for as low a cost as Tesla
can build a Model Y.
We really don't know if BYD are actually producing a profit with their EVs yet.
For the record, the only company that we know that is capable of making an EV at a profit
in the entire world is still Tesla, let alone a fully electric vehicle, as remember half
of BYD's vehicles are also hybrids, and I am just referring to their passenger vehicles
as BYD also make buses, which might possibly be profitable.
And yes the company BYD makes a profit, but they have other businesses, namely their very
profitable cell phone handset business.
My guess is that BYD are still making a negative net profit with their passenger EVs, but I
think it is a relatively small loss compared to many others, given the fact they actually
have hit volume production on some of their vehicles, are using in-house LFP cells, and
are all manufactured in China.
But Tesla's price war is going to hurt their margins too.
However BYD and legacy autos, have other very profitable businesses that can self fund their
EV ventures.
Although only to a certain point.
What happens when these companies want to make millions of EVs a year.
If Ford are losing $20,000 for every EV they sell, it's not so bad if they are just selling
100,000 a year or so.
But if it's a million, then that becomes $20 billion a year.
Spoiler alert, this is not a sustainable business model.
Even if they get their net losses down to $10,000 per vehicle its still not scalable.
And then think about when they want to get to 2 or 3 million EVs a year.
Really how is that going to be possible.
It doesn't matter how much they scale, they will still have car dealers and labor unions
to pay for.
And that's legacy companies like Ford, with over a century of experience in making cars.
What about Rivian or Lucid, who are losing about 10 times that much per vehicle, with
no side businesses to support these losses?
Anyway, we are talking about BYD, who perhaps do have a chance.
It's just all about scaling up from here.
They need to make more cars and then they will hit greater economies of scale and become
profitable.
And BYD aren't looking for massive profits like Tesla.
I mean it's China anyway, its all about making jobs, not so much profits.
Well the thing is, BYD can only sell more vehicles if there is the demand.
It looks like most of their models have saturated in demand.
At least in their current markets, they could always expand in the US perhaps, but that
might be tough, given some major protectionism with the local auto industry.
In fact not only might the demand saturated, we are seeing fields of electric cars in China,
being referred to as zombie cars, and some of these are BYD.
Therefore we can't even fully trust the numbers that we are getting from BYD in the first
place.
But BYD are so fast at bringing out new models, it doesn't matter they will just keep creating
more and more models for different lifestyles and people's needs, and continue to grow sales.
Except they have pretty much done that now.
They have a vehicle for every body type now, including their low cost compact the Dolphin.
Yet that hasn't resulted in people lining up to buy one.
Their models variety is also at saturation.
They can't grow any further.
Well actually they don't even offer a full size SUV yet, they have plenty more room to
grow.
No, they can't enter that segment, because they are only using LFP cells, when you put
LFP cells in larger cars, then due to the additional weight, you get a serious drain
on range, that don't meet consumers requirements.
Think about it, its a larger vehicle, which will cost more, but then offer terrible performance,
and low range, for a higher price tag, not to mention how heavy it would be with all
those LFP cells resulting in worse braking time, and even worse acceleration.
Yet for more money.
This is why legacy have gone with nickel cells, they will be able to compete with longer range
vehicles that are larger, like the BMW iX.
I think BYD is more or less about what it can be.
And this includes them still having to push half their vehicles as hybrid, at an extra
stretch.
They still only sell under half a million BEVs a year.
Tesla is at 4 times that.
Yet people say BYD is taking over Tesla.
Ok BYD sales in China maybe stronger, as they are selling domestically.
It's also much harder to compete with Tesla outside of China, given that Tesla also manufacturers
locally in other continents, and doesn't have to pay import tariffs or additional shipping
charges.
BYD may have found their niche, being a low cost electric vehicle, for people who cannot
afford a Tesla, but are desperate to go electric, and willing to forgo performance, handling,
safety, a nice sound system, self driving, cargo space, and all the other Tesla features.
And possibly BYD can become profitable with autos, if they are not quite there already.
Although we don't know the difference between BYD's margins when it comes to their BEVs
or PHEVs.
I can't see BYD expanding their BEVs that much more, but in all honesty they have surprised
me to get this far too.
They have done well, especially compared to the others.
But getting an A for effort, doesn't guarantee profitability.
Whereas Tesla's models are so popular, Tesla hasn't had to bring out any new models, instead
Tesla literally built more and more factories for the same model, and kept economies of
scale, and improving and refining manufacturing for the same models, which are evolving.
Tesla is still limited by batteries, so there is no point in spreading their model range
thinner, until they have enough batteries even for their existing models.