November 28, 2023

Elon Musk’s Tesla was the global leader in electric vehicle sales at the start of 2022, buoyed by booming demand and profits from the fast-growing Chinese market. But in the first six months of the year, China-based BYD emerges as a massive new competitor with total sales — including plug-in hybrid models — that topped the leader in electric vehicles in the United States.

BYD, whose Berkshire Hathaway by Warren Buffett is a longtime investor, 641,350 plug-in electric and hybrid vehicles delivered For customers in the first half, up 315% over last year, compared to Tesla 564,743, up 46%. Tesla’s sales of battery-powered models maintained their lead over BYD on that basis (in June, for example, 64,218 of 133,036 BYD consumer cars sold were “new energy” models of plug-in hybrids). However, its lead appears to be shrinking as its Shenzhen-based rival increases and other Chinese competitors such as the fast-growing XPeng and production NIO, especially of the higher-end models that compete directly with Tesla.

“The first half of 2022 we delivered total sales of over 640,000 units,” the company tweeted on July 3.

Notably, BYD appears to have been less affected by the dramatic Covid-related shutdowns that slowed production at Tesla’s Shanghai plant to a crawl in April and May.

The gains for Chinese electric car makers are not surprising given how broad this market is. In 2021, sales of electric vehicles in China, including plug-in hybrid cars, reached 3.3 million unitsdwarfed 608000 electric vehicles and auxiliary components It was purchased by consumers in the United States. These sales have been encouraged by aggressive government policies, but China also has a wide range of smaller, less expensive electric cars like BYD’s attractive Han’s car is about $32,800. By comparison, affordability remains a major challenge for potential buyers in the US with the current average transaction price for a battery-powered model at $64,000, according to Kelly Blue Book — reflecting US Tesla’s dominance in the segment.

“Electric vehicle startups in China are making a concerted effort to target the premium end of the domestic market and ultimately abroad,” Edison Yu, equity analyst at Deutsche Bank, said in a research note. “We are already seeing intense local mass market competition from Leap Motor, Hozon Neta, WM Motor, BYD and several sub-brands of OEMs (GAC/Aion, BAIC/Arcfox, SAIC/R-brand). New entrants have shown their willingness To absorb deep losses to quickly gain volume share.”

Like BYD NIO, which is inspired by Tesla’s business model, it has also made steady sales gains in China this year, buoyed by new products like the ES7 electric SUV that went on sale last month, with a starting price of about $69,000. This month, the company said its sales of electric vehicles rose 14% to 25,059 in the first half.

Analysts generally expect Tesla’s production pace to accelerate in the second half of 2022, helped by the addition of new plants in Germany and Texas, although production has temporarily slowed again with Giga Shanghai and Giga Berlin as these facilities are adjusted to boost production capacity.

Among the major automakers, Volkswagen and Hyundai-Kia Group are also increasing competition for Tesla in global markets as new Chinese players look to expand sales in Europe and Asian markets. In the long term, GM and Ford aim to reduce Tesla’s dominance in the United States with aggressive plans to boost production and sales of a wide range of electric vehicles. GM is looking for mass market buyers with its surprisingly affordable 2023 Chevrolet Bolt EV, starting at $26,595, as well as discerning buyers of the $62,000 Cadillac Lyric SUV and $109,000 Hummer EV. The Ford F-150 Lightning Pickup, a battery-powered version of the American bestselling sedan, starts at $39,974 and the Mustang Mach-E crossover, with a base price of $43,895, is cheaper than the Tesla entry-level Model 3 sedan, at $46,990.

With its line of luxury cars and the possibility of a recession in the US and Europe as of late this year, Tesla may face lower demand by the end of 2022.

“The elephant in the Tesla room (and the broader market) with dark economic storm clouds on the horizon and Musk himself believes the threat of a recession is imminent, so what does this mean for Tesla’s future demand story?” Wedbush analyst Dan Ives wrote. “While a softer macro will clearly affect demand around the periphery in the coming quarters, we believe Tesla has significant demand capacity to reach approximately 2 million units in 2023 globally with production capacity that could exceed this figure when factoring in Austin and Berlin.” to normal. China’s production target.”

Tesla also faces fresh competition in the US from new competitors including Lucid and Fisker Inc. and Rivian, if they can increase production through 2023 and overcome ongoing supply chain issues and rising costs for raw materials and components.

Rivian, for example, reassured investors on Wednesday noting that he still expects it Delivery of no less than 25000 Electric trucks, SUVs and delivery trucks this year. That led to an 11% jump in its share price to $29.77 on Wednesday afternoon on the Nasdaq. Tesla shares fell about 1.4% to $689.25 in afternoon trading on the Nasdaq.

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