Ok we are going start getting into more detail with BYD. Obviously this is the big one, we
should be concerned about, as Tesla investors. So lets go over some information and numbers
about BYD, go through some financials, review their products they have for sale, and see
how many sales they are getting.
It can be a little scary sometimes to take a deep look at what may be a fair competitor
to Tesla. It can be hard to do it without blinders on. You need to be honest with yourself,
rather than just pick reasons Tesla is better. This is one of the issues I believe legacy
autos have, along with their investors. They are too scared too look down the rabbit hole.
This is known as cognitive dissonance.
But that is where we are about to venture with BYD.
First off BYD has a market valuation of around $110 billion, compared to Tesla at currently
around $730 billion. So Tesla is a significantly larger company. BYD has a p/e ratio of 161,
compared to Tesla at 385. Although BYD's income is supplemented with their hybrids also. Yes,
BYD is not an all electric auto manufacturer, they started with hybrids. They also sell
buses and trucks, and other commercial products, batteries and electronics. Along with energy
solutions like battery storage. They are very vertically integrated also,
and even make their own in-house batteries. They are the company in the world that resembles
Tesla the closest.
In fact it would appear that BYD are currently the leaders in LFP batteries, their cost per
KWh is meant to be around $70, compared to CATL at around $100. With an energy density
of 140 Wh/kg, compared to CATL at 125 Wh/kg all at the pack level.
I would say that CATL are likely going to catch up with this soon, especially given
how much they are investing lately. Which is great news as CATL supply Tesla, and this
would be a big improvement on what Tesla are already achieving. I guess it's good to see
the potential LFP batteries have. Of course they are not using Tesla's battery day technology,
so when Tesla start making their own LFP batteries, that will be another major turning point for
the company. This will be ground breaking and result in electric always being lower
cost than every ICE car.
But right now, one of BYD's strengths is certainly their LFP technology in their Blade batteries.
Which they are also selling to other manufacturers, like Toyota.
BYD dont appear to be doing much in the way of FSD, their vehicles do not even have lidar
in them when compared to some NIOs. Remember for all cars to self drive, they will need
lidar in them if they dont use Tesla's FSD. [Show NIO's lidar build into the windscreen]
NIO has a built in Lidar which looks a lot better than all the other lidar systems. But
still this takes up valuable real estate in the car, and adds to extra cost, and compromises
design.
In other words I dont think BYD will be offering autonomous vehicles any time soon. That is
a major disadvantage over Tesla. If they can't drive themselves, then consumers will discard
them almost as fast as ICE. They want the future. And given that the BYD price points
aren't majorly under Teslas, at least outside of China, well then it's worth paying the
extra for the Tesla if it saves you so much time with self driving.
BYD have actually sold over 100,000 units of their sedan the Han, but believe it or
not, the car is not designed electric from the ground up, it would seem they are struggling
to let go of their past, and go all in on electric. The Han has a hybrid version too.
Although around 3/4 of the sales have been for the electric version.
But overall BYD did achieve over 50,000 units in July alone. Just under half of those were
BEVs. Which is around 75,000 a quarter, Tesla might not be far off 250,000 now. So BYD are
selling 1/3 as many BEVs as Tesla. That is quite significant. Tesla do however produce
more BEVs in China than BYD.
Looking at the financials for the first half of 2021, BYD's revenue was around US$14 billion,
compared to Tesla's BEV revenue at just under $20 billion. However, this includes all of
BYD's activities, not just their BEV revenue. But BYD came in at a gross profit margin of
just 11%, compared to Tesla at 28% in Q2. Of course this is BYD's margin for all their
actitivities, there is a strong possibility that the margins might be significantly lower
for BYD's electric vehicles. But we can see from last year their margins were at 18% margin.
The main difference is ramping up more electric vehicles.
In 2020 BYD sold 130,000 BEVs, and apparently 93,440 for the first half of 2021. Annualized
to 187,000 for the year, a 43% increase. Could it be that BYD lose money on every sale of
their BEV, and are subsidizing the growth with their hybrid business?
That is a major difference in profit margin. Tesla's profit margins are improving.
BYD also have the lowest cost battery, yet still such low profit margins or possibly
negative. Tesla are just that much better at manufacturing at lower cost. But think
about how much more time and effort goes into a Tesla, compared to how many models BYD are
just pumping out.
In the space BYD have launched the Han, Tang, and Dolphin, Tesla have launched no new models
in that time. BYD are rushing them, Tesla can take their time to perfect design with
manufacturing.
Let's compare the BYD Han specs to Tesla anyway. The Han starts at around US$35,000 excluding
local Chinese subsidies. Yea, remember that, all the Chinese cars are also benefiting from
local subsidies. But this gets about 220 miles of range, compared to the Model 3 Standard
Range with 262 miles of range. But the Model 3 is currently $40,000, although it has been
close to $35,000 in the past. In other words, Tesla would have no problem still making a
profit a the BYD price point.
The most expensive Han is about $39,000, with 262 miles of range. So the price is about
the same as a Model 3 for similar range. But the Han cannot achieve long range, as they
are using the LFP batteries. So it is limited to this range.
In other words, just on range, the Tesla is priced about the same as the BYD, but it's
a Tesla, with all the Tesla extras.
BYD have also gone in at the bottom of the market with their new EA1, also known as the
Dolphin. Which could be regarded as competition to the Tesla Model 2 possibly. So lets quickly
go over some of the specifications.
Now the idea of this car is to offer a really cheap EV, and they succeeded, excluding local
Chinese subsidies it starts at around $16,500. This comes with a 30 KWh battery, and offers
187 miles of range NEDC, which is around 130 miles EPA. The top of the range version is
around $21,000 with a 45 KWh battery and 252 miles of range NEDC or 176 miles EPA.
So this is using the BYD's revolutionary new Blade LFP iron based batteries. It has a 0
to 30 mph time of about 4 seconds. That is slow. It does have a curb weight of 1405 kg
for the 45 KWh version, the Model 3 standard range is only 1610 kg, that BYD seems very
heavy for such a small car.
But remember this car will still be limited to battery production. BYD can't make enough
batteries to mass scale this car any time soon. At the end of the day, the EV race to
market share is all about how many batteries you have at your supply. All EVs will pretty
much sell anyway. But you also need to make sure you can produce at a profit, or have
another profitable business to subsidize your growth. Which BYD has, whereas legacy autos,
well their currently profitable ICE business, might end up being a liability. This car is
likely just to show how quickly BYD can launch models to market. Tesla don't bother launching
models unless they are going to sell in the millions, which Tesla don't have the batteries
for quite yet, so they would rather concentrate on selling the models they do have, with a
higher profit margin.
[Show ad or image of Volkswagen ID.Life - small compact car]
Same for Volkswagen, trying to launch a compact EV before Tesla, with their new ID Life. At
something like $24,000, undercutting the Model 2. Oh but wait, this isn't due out until 2025.
And what is it Elon keeps saying about prototypes, something like any old fool can make a prototype,
but manufacturing is hard. Oh also this ID Life is actually the most hideous EV I have
seen so far, and that's the prototype, can you imagine how much uglier the production
car will end up being.
At the end of the day, BYD will be limited by batteries just like everyone else. They
have not only taken the initiative to supply their own batteries in-house, they have also
designed their own LFP battery, supposedly more energy dense than the CATL equivalent.
But they still can't even really beat Tesla on price, at least not like for like. They
offer cheaper versions of EVs, that have significantly lower range. And perhaps there is a market
there, I don't think Tesla will really touch any vehicles with a range that low, so they
my leave the budget auto market to another manufacturer. The thing is though, even despite
BYD's vertical integration and their own revolutionary batteries, and even with them barely even
undercutting Tesla's price points, it would appear there is a very small gross profit
margin here, if any. And then when you factor in all the operating expenses, then without
a doubt, BYD are still losing money with their EV business.
Their brand is not as strong as Tesla's, Tesla has so much more goodwill that consumers are
willing to pay extra just because its a Tesla, over a BYD. Implying BYD cannot raise their
prices, and must remain competitive as a cheaper version of Tesla. Which they are only able
to achieve with very short ranged vehicles. But like I said even doing that, they do not
appear to be making a profit.
Remember mass production with positive cash flow is excruciating. That's excruciating
for someone as smart as Elon Musk, and as talented and resourceful as the Tesla team,
full of innovation. So how hard is that going to be for a Chinese company 1/6 the size?
This is my summary so far on BYD, but I think we need to do some further research. This
is just my preliminary research, of course as always its going to be great when all of
you add your comments too, and perhaps we can get to the bottom of it all.