Tesla Should Be Seriously Worried About BYD
Tesla Should Be Seriously Worried About BYD
BYD's Mexico factory could be a major disruption to Tesla's dominance
Tesla Should Be Seriously Worried About BYD
BYD’s Mexico factory could be a major disruption to Tesla’s dominance
Tesla has already revolutionised the automotive world, and the entire industry is in catch-up. But their upcoming affordable hatchback model, commonly dubbed the “Model 2”, and its purpose-built Mexico factory promise to take Musk’s baby to the stratosphere by making them a true mass-market automaker. Some are even predicting this model could push Tesla’s sales numbers so high that they could outshine the likes of VW or Toyota. But, this master plan might already be in jeopardy, as Tesla’s biggest rival, BYD, is looking to build their own Mexico plant and enter the US market with EVs that make the Model 2 look outdated. So, should Tesla be worried about BYD and their Mexican plans?
Before we dive in here, it’s worth saying that Tesla has yet to publicly declare the specs of the Model 2. But there have been enough press releases and hints from Musk for us to assemble a reasonably accurate picture. It’s almost certain the car will come with a 53 kWh battery pack sourced from BYD and around 250 miles of range (WLTP) with a fast charge time of around 30 minutes, as multiple trustworthy sources have claimed this. We also know it will be smaller than a Model 3, with possibly a hatchback design. Musk’s target is for the Model 2’s price to start at $25,000, though some estimate it will likely cost more like $30,000. But we will have to wait to find out if these estimates and predictions are correct, as production is not slated to start until late 2025 in Tesla’s Texan factory before production moves to Mexico when the custom-built factory is completed in 2026/2027.
If Musk can deliver the Model 2 as predicted, it would make it one of the most useable and affordable EVs in the US and undoubtedly would be a sales phenomenon.
But for those of use outside the US, we already have EVs with these specs and prices from BYD. Take the BYD Dolphin; its top trim has an in-house designed and built 60 kWh battery, 265 miles of range (WLTP), a 10% to 80% charge time of 41 minutes and a price tag before subsidies of only $30,000 (equivalent). It also has the same 0–60 time of 7 seconds and the same size as the Model 2 is predicted to be. But the Dolphin could get significantly better over the next few years. The European-built base-spec Model Y actually sources its battery from BYD and is the same unit as in the Dolphin, but in the Model Y, it can charge from 10% to 80% in only 19 minutes. What’s more, BYD’s manufacturing is getting more and more efficient by the year, tumbling their production costs and enabling their profit margins to soar even while they cut the prices of their cars.
So, by 2025, the Dolphin will likely cost closer to $25,000 (equivalent) and could possibly be updated to charge way faster than it currently can. As such, the Dolphin is already making the Model 2 a late-comer to the mass-market EV world, and maybe even obsolete.
Thanks to affordable models like the Dolphin, BYD recently overtook Tesla as the world’s largest EV maker by units sold and is even rivalling them in terms of profit. What’s remarkable is that they did this while only really selling cars in China. They are sold in the UK, Europe and Australia but have only been on sale for a couple of years, so the sales figures in these regions are relatively small. Nonetheless, BYD is one of the fastest-growing brands in these markets and is set to dominate them in years to come.
However, importing Chinese-made EVs into these countries is economical, as they have low tariffs, and they still qualify for EV tax breaks or grants. The same can’t be said of the US, where import tariffs are excruciatingly high, and EV tax breaks are only for American-built vehicles. This has kept BYD out of America, one of the largest EV markets in the world, allowing Tesla to dominate there.
So, BYD is now looking to build their own Mexico factory, enabling them to bypass US and Canadian import tariffs and even qualify for EV tax breaks. To add insult to injury, they are most interested in a site in Nuevo León, right next to where Tesla’s Model 2 factory is currently being built. But, unlike Tesla, BYD actually already has a presence in Mexico, as they have an EV and hybrid bus factory there. This, in theory, could mean they can build their Mexican factory far faster than Tesla’s.
We have yet to get confirmation that BYD will build this factory or what models they want to build there. But, if BYD goes ahead with this plan, Tesla could face some seriously damaging competition on its home turf.
So, should Musk be worried about BYD’s westward expansion? Yes, they are already slowly eating away at Tesla everywhere outside America. Although, he might not have to worry about them reaching his home shores. Biden is actively exploring how to prevent the upcoming tidal wave of made-in-Mexico Chinese EVs with varying initiatives. Some proposed ideas go beyond the typical trade-protecting tariffs. The US government has said they are ready to ban Chinese EVs on national security grounds and has even drafted legislation that would ban “smart” cars from Chinese companies, regardless of the country they are assembled in. After the whole Huawei incident, that move has precedent, so it is 100% possible. Is this why BYD have yet to commit to their Mexico plans? Possibly. But either way, Tesla should be worried that BYD will expand into their markets, undercut them in price, outsell them as they already are, and derail Tesla’s EV master plan.
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Sources: Reuters, Notebook Check, EV Database, Will Lockett, Forbes, Car Magazine