Is Tesla Still The King Of EVs?
Is Elon still ahead of everyone else?
It’s been a weird year for Tesla. Musk went against his own engineers and pursued vision-only autopilot, which many experts say is the fundamentally wrong direction to go. This misstep is even more questionable when you consider that the DoJ is investigating multiple fatal crashes that appear to have been caused by Tesla’s autopilot. Earlier this year, Tesla kicked off the EV price war by slashing their prices and, in doing so, destroyed their industry-leading profit margins. Despite all of these significant setbacks, Tesla has delivered a record number of vehicles, has started Cybertruck production, and has updated the Model 3. Meanwhile, all of Tesla’s main competitors have taken some massive leaps forward, launching new cars and delivering a record number of vehicles themselves. So, the question has to be asked: Is Tesla still the top dog in the EV movement? I have had a look at the numbers, and I was surprised.
Let’s start off by looking at Tesla’s numbers. During the first half of 2023 (2023 H1), they delivered a total of 888,975 vehicles, took home a revenue of $48.227 billion and had a net profit of $5.2 billion. That gave them an overall profit margin of 10.78%.
Okay, so what do all of these numbers mean? Well, for some context, in 2022, Tesla’s net profit margin peaked at around 25%; they also had a revenue of $81 billion and a net profit of $12.58 billion from delivering 1.31 million vehicles. These numbers indicate that Tesla is delivering roughly 26% more vehicles than last year, but because of the much lower profit margin, they are actually making 17% less profit than last year (based on halving last year’s numbers).
This reduction in profit has many causes. Setting up new factories, scaling production of their 4680 battery, Cybertruck and Tesla Semi, as well as retooling for the upcoming new facelifted Model 3 and later facelifted Model Y, will have cost Tesla billions of dollars. This, combined with the EV price war earlier this year (which Tesla started) that destroyed their incredible profit margins, is why Tesla has less-than-ideal-looking books in 2023.
But what about Tesla’s closest rival? How are they stacking up in comparison?
If you live in the US, you might think Tesla’s closest rival is Rivian, Ford, Kia or Hyundai. But on a global scale, these companies don’t come close to BYD; they are Tesla’s true nemesis. BYD currently only sells cars in a few Asian countries and is starting to sell a few cars in Europe. However, thanks to their incredible in-house battery technology, excellent specs, top-notch build quality and super affordable price, they are selling nearly as many EVs as Tesla while being on sale in fewer countries!
When I say outselling Tesla, I mean it! During the first half of 2023, they delivered 616,647 EVs. That makes them the world’s second-largest EV producer by a significant margin. Considering they are yet to become a global brand, those are some incredibly impressive figures.
Now, unlike Tesla, BYD does sell plug-in hybrid vehicles, and during the first half of 2023, they sold about 1.68 million of them. So comparing their financials like-for-like is a little tricky. However, for the first half of 2023, their revenue was $35.7 billion, their net profit was $1.5 billion, and their profit margin was 18.3% (averaged of Q1 and Q2 profit margin). Their net profit is actually nearly triple that of 2022, showing just how rapidly they are expanding. This massive expansion also explains why their profit margin and net profit don’t quite add up, as it seems they are spending a lot of their operating profit on scaling up, hence why the net profit is smaller than the profit margin would suggest.
It’s hard to read into these figures too much, as much of the profit from BYD came from hybrid vehicles. But there are a few signs that BYD’s EVs are just as, if not more, profitable than Tesla’s. Take the BYD Seal, their Model 3 competitor that is significantly cheaper yet offers similar specs. Analysis has shown that it has a 16% profit margin, meaning it is making more money for BYD than the Model 3 is for Tesla right now.
Again, I want to reiterate that BYD has achieved these EV sales figures and profits while mostly confined to China. They have only just started selling in the European and Australian markets. Despite this, the BYD Atto 3 EV was the best-selling EV in Sweden in July, beating out every Tesla, and their sales numbers in other EU countries are looking very robust. BYD is even planning on building European factories to supply the continent directly. So, it seems BYD has the demand and the ability to supply far more EVs than they are currently selling. So don’t be surprised if they sell far more EVs than Tesla in the next few years.
But there is another side of BYD we haven’t talked about batteries. You see, BYD has an incredible battery called the blade battery that is energy dense, fast charging, efficient, eco-friendly, extremely long-lasting, super safe and most importantly, incredibly affordable. In fact, this battery has the potential to cost a third that of the equivalent lithium-ion battery and nearly half the price of Tesla’s own 4680 cells. This is why they can undercut Tesla on price and still make a decent profit. But other manufacturers also want to use this battery, so BYD is selling it to the likes of Toyota, Mercedes and even Tesla (who currently use it in their EU and Asian Model Ys). Yep, Musk is buying batteries from his main competitor rather than using his own in-house cells.
As more automakers switch to EVs, it seems BYD is going to sell more and more blade batteries, as right now, it has the best price-to-performance ratio. Meanwhile, Tesla can’t build enough of its 4680 cells for its own cars, let alone sell them to others for a profit. So, in the near future, there is a big possibility that BYD’s battery business could push its profits far above Tesla’s.
Tesla and BYD are surging ahead of the competition. Their market share and profits are unlike any other EV maker. Currently, Tesla is still in the lead, but BYD is snapping at their heels. Over the next few years, Tesla’s sales will continue to grow, especially as the Cybertruck enters the market. But the Cybertruck is only really going to be a sales hit in the US, as this is the only country that buys these types of vehicles. What’s more, the days of Tesla making nearly 30% profit on each car will likely never return. Meanwhile, BYD is rapidly expanding into new markets, selling exceptionally well in them, and is undercutting Tesla in price while remaining more profitable. So, while Tesla is still the top dog, its throne is very much under threat.
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Source: Reuters, Reuter, CounterPoint, Electrek, Electrek, Reuters, Barrons, Y Charts, Y Charts, The Verge, Statista, Yicai Global, Bloomberg, Will LockettÂ