Tesla (TSLA) and BYD (BYDDF) are the world’s largest electric-vehicle makers, becoming more direct competitors in China and much of the world.
In 2022, China EV and battery giant BYD’s vehicle sales raced ahead of Tesla’s. For all-battery electric vehicles (BEVs), BYD seized the crown in Q4. The only question is how large BYD’s BEV margin was over Tesla.
BYD also has significantly higher gross margins than Tesla, and has massively closed the gap in net income and revenue.
In Q3, Tesla reported its worst earnings in two years, easily missing lowered analyst views. Worse, CEO Elon Musk “tempered expectations” about the Cybertruck, a future Mexico plant and much else on the conference call.
BYD announced strong third-quarter earnings and sales growth vs. Q2 and a year earlier and it’s begun deliveries of several new models. BYD has continued to boost sales, but in recent weeks has had to announce larger discounts amid an intensifying China EV price war.
Overseas sales are key area of growth and margins for BYD, which just announced plans for its first passenger EV plant in Europe.
Tesla stock has had a strong 2023. Shares tumbled following Q3 earnings but has rebounded to around various entries. The EV maker is struggling to grow with profit margins that are now in line with traditional automakers. But TSLA stock is not valued anything like a traditional automaker.
BYD stock has fallen sharply in recent months amid price war concerns.
Let’s take a look at BYD vs. Tesla, as well as BYDDF stock vs. TSLA stock.
Tesla Vs. BYD Sales In 2023
Tesla deliveries fell to 435,059 in Q3, declining from Q2’s record 466,140 and missing the consensus around 455,000. Model 3 and Y deliveries slowed to 419,074, with most of that the Model Y. Model S and X deliveries dropped to 15,985.
Production tumbled to 430,488 in Q3 from Q2’s 479,700, amid factory upgrades and an effort to slash inventory.
Sales should rebound in Q4, with various expiring subsidies pulling forward demand. Tesla is pushing hard to reach 1.8 million deliveries in 2023, which would require just under 476,000 deliveries in Q4, a new record.
Analysts expect just above 480,000, with results likely before the open on Jan. 2.
Meanwhile, BYD on Jan. 1 announced record December sales of 341,043 EVs, including plug-in hybrids. Q4 sales hit 942,779, with full-year sales of 3,012,906, topping BYD’s target of three million.
Notably it sold 526,409 all-electric BEVs in Q4, up from 431,603 all-electric BEVs in Q3. That should top Tesla for the first time, and with a clear margin.
just shy of Tesla’s total. Including plug-in hybrids, sales hit 824,001.
BYD brand sales hit 321,570 units in December. For its premium brands, the established Denza sold 11,929 units. The brand-new Fangchengbao sold 5,086 Bao 5 off-road vehicles. The superpremium Yangwang sold 1,593 U8 off-road vehicles.
Overseas sales swelled to a fresh record of 36,095, up nearly 18% from November and 219% vs. a year earlier. Overseas sales should continue to trend higher, especially after mid-2024. That’s when BYD should begin operating its first own RoRo vessel for shipping autos, while a Thai factory should open up.
BYD, like many China EV makers, offered sizable discounts late in the year as the price war intensified.
BYD is China’s largest automaker. It was the world’s 10th largest automaker in the first half of 2023.
Tesla Price Cuts
Tesla slashed prices worldwide in January 2023, with further cuts since then. The price cuts made Model 3 and Y vehicles eligible for U.S. tax credits of $7,500.
China EV makers, including BYD, slashed prices in response to Tesla.
Tesla has tweaked some prices higher at times, but those have been easily offset by price cuts, substantial inventory discounts and other incentives, which continued in the third quarter.
On Sept. 1, Tesla sharply cut Model S and X prices in China and the U.S. The base Model X is now eligible for the $7,500 federal tax credit. Tesla also cut the FSD (Full Self Driving) price to $12,000 from $15,000.
On Oct. 5, Tesla cut U.S. prices of the Model Y and Model 3. That came a couple days after launching a lower-range Model Y that’s $3,750 cheaper than the prior base model.
In mid-October, Tesla cut the base Model 3 price in the U.K. and Model Y prices in Canada.
Model Y inventory discounts are heavy in Europe, with mounting Model 3 discounts in the U.S.
Tesla slightly raised Model 3 and Y prices in China multiple times in November, perhaps to spur undecided buyers into action. But in late November, Tesla announced an insurance subsidy for the base Model 3 and Y, the most popular variants, as well as low-interest loans.
Discount pressure could build on Tesla with the China EV price war squarely in its niche, but sales have been robust.
Tesla Subsidies In 2024
Back in the U.S., the first two Model 3 variants lost their $7,500 IRA credits as of Jan. 1 due to tighter battery sourcing rules. Tesla could adopt different batteries over time, but would likely be more expensive. The EV giant will likely adjust U.S. prices as a result.
Germany abruptly ended EV subsidies as of Dec. 17, cutting off a 4,500-euro environmental bonus two weeks earlier. That came a few days after the government scrapped plans for a reduced 3,000-euro subsidy in 2024. Tesla discounted its EVs by 4,500 euros in Germany through year-end, covering the lost subsidy.
France ended subsidies for EVs made outside of Europe as of Dec. 15. That hits the China-made Model 3, but not the Berlin-made Model Y.
On the plus side, Americans buying Tesla vehicles still eligible for IRA credits in 2024 will get that credit at the point of sale, vs. via a tax return.
Tesla Model 3 Revamp
Tesla unveiled an upgraded Model 3 in China on Sept. 1. The EV giant says its “Highland” Model 3, which boasts a higher price, has 9% longer range.
Deliveries in China and Europe started in late October. In early 2024, Tesla Fremont will make the new Model 3 for the U.S. market.
It’s unclear if the modest changes, after six years, will revive the Model 3’s fortunes beyond a short-term bump. Weekly registrations aren’t showing strong Model 3 sales in China.
Tesla Cybertruck
Tesla held its Cybertruck delivery event on Nov. 3.
The AWD Cybertruck starts at $79,900 before IRA tax credits, with an estimated range of 340 miles.
The Cyberbeast variant starts at $99,990, with a range of 320 miles. It will not be eligible for IRA tax credits.
The base, real-wheel drive Cybertruck won’t be available until 2025. It’s estimated”to start at $60,900 before tax credits. The range will be just 250 miles.
For the next several months, Tesla is selling “Foundation” versions of the AWD and Cyberbeast variants with various extras, but with an extra $20,000 added to the price.
When the Cybertruck was first unveiled in 2019, Tesla said it would start at $39,900 with a top-variant range of 500 miles.
Tesla will offer a “range extender” battery that would take up much of the truck bed.
At the Tesla Cybertruck event, Musk gave no indication of production or delivery expectations. He was notably upbeat on the new EV, after he warned on the Q3 earnings call that Tesla dug its own “grave” with the difficult-to-produce design.
The Cybertruck is the EV maker’s first new passenger vehicle since the Model Y launched in early 2020. But the Cybertruck is likely to largely be a North American vehicle, so Tesla may not have a new vehicle for most markets for several more years.
It’s unclear if the Cybertruck will have official deliveries in Q4.
In late 2022, Tesla handed over a few dozen Semi trucks to PepsiCo (PEP), but still hasn’t declared any Semi deliveries yet, or revealed prices and actual specs.
Other Vehicles
Tesla has teased a next-generation EV, but hasn’t even shown images. It plans to build an EV plant in northeastern Mexico that will make that vehicle, but hasn’t broken ground yet. On the Q3 earnings call, Musk suggested he wouldn’t go “full-bore” on the Mexico plant until the interest-rate and economic environment is more favorable.
Musk said in early December that the Austin plant will be the first to make the next-generation plant. That would have higher labor costs, but Musk expects to use “revolutionary” manufacturing techniques to reduce such costs. However, this could result in lengthy delay.
A selling point for a made-in-Mexico cheap EV is that it could take advantage of low labor costs, limited U.S. competition and the $7,500 IRS tax credit. However, if Tesla uses made-in-China LFP batteries, as it does with its base Model 3, the new EV wouldn’t be eligible for any IRA credits.
Tesla Production
Tesla capacity has increased at its Berlin and Austin plants after significantly expanding its mammoth Shanghai factory last year.
But demand hasn’t kept up with expanded output, even with Tesla slashing prices and curbing production well below capacity.
Tesla Shanghai no longer needs to export many Model Y vehicles to Europe. Model 3 shipments may decline in 2024 with French subsidies gone.
Tesla has entered Thailand. It’s a test to see how much demand Tesla can have in middle-income countries besides China. A cheaper Tesla model would be helpful in such markets.
BYD Expansion
BYD is ramping up EV and battery production, with more China plants coming on line. It’s already building an EV factory in Thailand, set to begin production in mid-2024. BYD has announced it would build an EV plant in Brazil.
In late December, BYD confirmed it would build a passenger EV plant in Hungary. BYD already makes buses in Hungary.
BYD launched several new models in 2023, across a wide array of prices. The small Seagull, starting at around $10,700, has been a bit hit.
BYD’s upscale Denza brand has expanded from the D9 minivan in late 2022 to the N7 crossover and N8 SUV.
BYD’s super-premium brand Yangwang has begun U8 deliveries, with a U9 supercar following in 2024. BYD’s Fang Cheng Bao brand has also started deliveries of the Bao 5, with more models to come this year.
BYD is expanding massively overseas. Thailand has become a big market, but it has entered many Asian countries, including Japan, India, Malaysia, Australia, Singapore and more. It’s the No. 1 EV seller in Israel and has entered most of Europe. BYD also has started deliveries in Mexico, as part of a big push throughout Latin America.
BYD has led its export push primarily with the Atto 3 small SUV, but is adding the Dolphin and Seal to many markets.
Exports are still a small share of sales, but up sharply from almost nothing in mid-2022. Notably, BYD is generally selling EVs overseas at higher prices than at home, boosting margins even after shipping and other related costs.
Along with the Thai plant, BYD will put its first RoRo ship for transporting cars into service. The combination should significantly add to overseas sales, with Brazil and Hungary plants likely following in 2025.
BYD has said it has no plans to enter the U.S. market for personal vehicles, though it does build EV buses in Lancaster, California.
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Tesla Vs. BYD Batteries
Tesla traditionally has not mass produced its own batteries. For lithium-ion batteries, its joint venture partner Panasonic makes the cells and Tesla packages them. It also buys lithium-ion batteries from South Korea’s LG. Tesla also has bought lithium iron phosphate (LFP) batteries from China’s CATL.
Tesla is working on 4680 batteries, first touted at the 2020 Battery Day.
The 4680 batteries are standard lithium-ion chemistry, but the larger form factor offers the potential for various benefits and cost savings. Tesla’s 4680 production has picked up output in recent months, but still relatively low.
Also, three years after the much-hyped Battery Day, it’s unclear if Tesla has solved key technical hurdles to allow for 4680 mass production and cost savings. It’s also not clear if some of the battery benefits are coming to fruition.
Limited 4680 battery production could affect Cybertruck output.
BYD, meanwhile, is one of the world’s largest EV battery makers. Its Blade batteries are a specialized LFP. BYD is ramping up battery plants to supply third-party EV makers as well as storage, above and beyond its own EV needs.
In fact, Tesla uses BYD battery packs for a Model Y variant at its Berlin plant.
BYD, like CATL and some others, is working on sodium-ion batteries. Those could be useful in smaller EV vehicles as well as for energy storage.
There is buzz that BYD will unveil an updated Blade battery in 2024, as well as an upgraded hybrid system.
Both Tesla and BYD are expanding in battery storage for home and business applications or utility-scale projects, though Tesla gets its batteries from CATL. BYD also teamed up with South Korea’s LG for storage in North America and Europe.
Tesla, BYD Other Businesses
Tesla has its own Supercharger network in its markets. That’s especially important in the U.S. and countries like Australia, where third-party charging facilities are limited.
Tesla has struck deals with Ford, GM, Rivian and others to give those automakers’ EV customers access to Superchargers in the U.S. They’ll also adopt Tesla’s charger standard soon. Those deals, and some related charging subsidies, will provide a nice boost to revenue. But they will reduce Tesla’s charging moat in the U.S.
Tesla also has a solar installation business.
Tesla’s self-driving ambitions continue. Autopilot and Full Self-Driving help bolster Tesla’s image of cutting-edge technology, while FSD is a key source of revenue and profit, especially in the U.S. However, even FSD Beta remains a Level 2 driver-assistance system vs. a Level 4 or 5 fully autonomous system.
Tesla recently “recalled” Autopilot via an over-the-air software update to improve driver monitoring. That came as part of an ongoing NHTSA probe into Autopilot crashes.
Meanwhile, Reuters said a review of documents showed that Tesla knew of faulty suspension and steering parts across its model lineup going back at least seven years, but often blamed drivers when those parts failed. Norway and Sweden disclosed probes of Tesla suspension issues.
The Reuters report could open the door to further regulatory action and even criminal probes, as well as fueling class-action lawsuits.
BYD, notably, makes its own chips. That, along with the in-house batteries and other vertical integrations, helped BYD expand rapidly in the past two years as many rivals struggled from chip and other supply shortages.
The EV and battery giant also has solar operations.
BYD will introduce at least Level 2 driver-assistance systems in its Yangwang and Denza vehicles, as well as some BYD-brand EVs, over the next year. Level 2 systems, many with Lidar, are increasingly common in China, especially in premium models.
Rolling out quality Level 2 systems will be a priority for BYD’s brands in the coming year, as that’s increasingly becoming standard in mainstream and entry-level premium vehicles in China.
BYD Co. is largely known for its BYD Auto operations. BYD Electronics, which accounts for an increasingly smaller share of overall revenue, is involved in mostly low-margin businesses such as smartphone components and assembly.
In late December, BYD Electronics closed its $2.2 billion deal for the mobility business of Jabil (JBL). That will boost the unit’s exposure to Apple (AAPL).
Tesla X Factors
On Nov. 15, Elon Musk endorsed an antisemitic post on his X social site, replying that it was the “absolute truth.”
A slew of major advertisers have suspended ads on X, formerly Twitter. Musk said a few weeks later in a public interview that he shouldn’t have sent the reply, but also went after advertisers in an expletive-laden retort, saying they’re trying to “blackmail” him.
More broadly, TSLA investors fear ongoing damage to the Tesla brand, which is so closely linked to Musk’s own image. Musk’s more-divisive persona over the past year, often fueled by his X posts, has alienated much of Tesla’s traditional customer base.
Tesla Earnings
Tesla earnings plunged 37% in Q3 vs. a year earlier to 66 cents a share, the lowest EPS since Q3 2021 and below lowered estimates. Revenue rose 9% to $23.4 billion, but that also missed lowered views.
Ongoing price cuts have propped up vehicle demand, but at the cost of margins.
Tesla gross margin was 17.9%, down from 18.2% in Q2 and 25.1% a year earlier.
Tesla’s operating margin plunged to 7.6% from 17.2% a year earlier. That is now in the normal range for traditional automakers.
Net income tumbled to $1.85 billion from $2.7 billion in Q2 and $3.29 billion a year earlier.
Analysts have followed Q3’s results by cutting Tesla earnings estimates for 2023 and 2024, something they’ve been doing all year.
BYD Earnings
BYD earnings have been booming.
On Oct. 30, BYD reported net income came in at RMB 10.41 billion ($1.41 billion), up 82% vs. a year earlier and nearly 53% vs. Q2, in local currency terms. Revenue swelled 38.5% vs. a year earlier to RMB 162.15 billion ($22.6 billion), up 38.5% vs. Q3 2022.
The full results were in line with preliminary profit figures released earlier in the month.
Tesla’s net profit was still 31% higher than BYD’s in Q3, but the gap is narrowing considerably in a short span. Tesla’s net income was 1,092% higher in the first half of 2022, 345% higher in Q1 2023 and 190% higher in Q2.
BYD’s gross margin was 22.1%, the highest since Q3 2020. That’s up from 18.72% in Q2 and 18.96% in Q3 2022. BYD Auto’s gross margin surged to 25.7% in Q3 vs. 21.6% in Q2 and 22.8% a year earlier.
But BYD’s big discounts suggest gross margins will take a hit in Q4. Higher exports and sales of its Bao 5 and especially U8 vehicles should provide some offset.
Tesla Stock Technicals
Tesla stock plunged 65% in 2022, according to MarketSmith analysis. Shares surged 102% in 2023.
Shares hit a 2023 high of 299.29 just before the Q2 earnings report. TSLA stock plunged following earnings before partially recovering.
Tesla dived after Q3 earnings to hit a five-month low. But shares have rebounded above the 200-day and 50-day lines.
Tesla stock is building the right side of a double-bottom base with a 278.98 buy point. TSLA stock does have a shallow handle on a weekly chart with a 265.13 entry.
BYD Stock Technicals
BYD stock slumped 27.7% in 2022. Shares climbed 12.7% in 2023.
The EV giant hit a 52-week high of 36.27 on July 31, but has trended lower since then, tumbling in recent weeks amid the China EV price war.
BYD stock rebounded somewhat in late December, but has a lot of ground to cover.
Warren Buffett’s Berkshire Hathaway (BRKB) has been a longtime major investor in BYD. But Berkshire has sold slices of its H-shares in BYD in 12 moves, starting in late August. The latest was disclosed on Oct. 31. Berkshire still owns about 5% of BYD, based on all share classes, but has halved its stake.
Tesla Vs. BYD Market Cap
Tesla stock has a market cap of $789.9 billion as the end of 2023 off its peak above $1 trillion. That’s still far above BYD’s $75.5 billion.
With Tesla margins now more like a traditional automaker, and with growth constrained for the near future, Tesla stock has a high valuation for its EV-led operating businesses. Much of Tesla’s valuation is clearly based on hopes that Musk will achieve breakthroughs in self-driving, robotics and AI.
BYD stock is listed in Hong Kong and Shenzhen, and only trades over the counter in the U.S. That also means the BYDDF stock chart shows a lot of minigaps.
Tesla Stock Vs. BYD Stock
BYD sells far more EVs than Tesla and now has grabbed the “BEV” title. More broadly, BYD in many ways is the EV maker Tesla has claimed or aspired to be. BYD makes its own batteries and chips, and sells those batteries to third parties such as Tesla. Musk has talked about making a $25,000 Tesla; BYD makes EVs profitably at far below $25,000.
With Tesla no longer “production constrained,” it’s shifted to price cuts to support demand.
BYD has expanded in several big markets, and that is key to its efforts to be a global auto giant. Its model lineup continues to expand dramatically, with big moves upscale.
Tesla has begun Cybertruck deliveries, but significant shipments won’t occur for several months. Musk has said the vehicle will be a financial drain next year. A next-generation vehicle may not arrive until 2026 or later.
Tesla stock doubled in 2023 and is around various buy point despite big questions about its growth prospects.
BYD stock, meanwhile, has plunged on China EV price war concerns.
Both EV giants are delivering far more electric vehicles than rivals. Tesla profits tumbled in 2023. BYD earnings continue to surge vs. a year earlier.
So keep your eyes on BYD and Tesla, as well as Tesla stock vs. BYD stock.
Please follow Ed Carson on X/Twitter at @IBD_ECarson, Threads at @edcarson1971 and Bluesky at @edcarson.bsky.social for stock market updates and more.
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