On January 3rd, as the New Year began, several media outlets reported Tesla’s fall from the top spot in global electric vehicle sales with headlines like “Tesla Steps Down from No. 1 for Global EV Sales.” According to reports, Tesla’s global sales from October to December 2023 were just over 480,000 units. China’s BYD sold over 520,000 battery electric vehicles (BEVs) during the same period, taking the top spot in global BEV sales for the first time.
Since the first quarter of 2018, Tesla has consistently held the top in global BEV sales. This is essentially the first rank change in five years. Under the leadership of Elon Musk, Tesla broke away from traditional car manufacturing and service models, not constrained by the values upheld by traditional automakers, and built up enthusiasts with its overwhelming EV sales. Tesla’s significance in the auto industry is undeniable.
Moreover, Elon Musk, the CEO and co-founder of Tesla and a billionaire renowned for making provocative remarks, is competing for the top two spots among the world’s most prosperous. As a result, this incident was often reported with the tone of “The Fall of the Unhateable(?) Tesla.”
In addition, several media outlets called defeatism what Elon Musk, who heard the earnings announcement news, posted on X, saying, “Tesla is more like an AI or robot company than an automobile company.” They reported Tesla’s poor performance, announced on January 24th as a ‘”disaster.” However, if you look at the actual announced figures objectively, this story about claiming the top spot is less about Tesla’s underperformance and more about BYD’s impressive surge.
Tesla significantly lowered its operating profit margin for October to December 2023 from 16.0% in the same period the previous year to 8.2%, a decision mainly affected by price decreases in major markets such as the U.S. and China. However, sales during the same period increased by 3% from the same period the previous year to about $25.17 billion, a 20% increase from the same period last year, with just over 480,000 units sold. Moreover, Tesla’s annual sales in 2023 increased by 37.7% from the previous year to over 1.8 million units, maintaining its top spot in global annual BEV sales.
A slowdown in growth and a decrease in operating profit, which has been increasing, maybe a “disaster” for Tesla. Still, it would not be considered poor performance for a regular car manufacturer. Instead, it secured an operating profit margin of 8.2% despite the delay in launching the much-anticipated “Cybertruck” and price cuts to maintain the competitiveness of the familiar Model 3 and Model Y. Rather, producing the best results in difficult circumstances should be highly valued.
On the other hand, BYD outsold Tesla in the sale of BEVs, selling more than 520,000 units between October and December 2023. This was a whopping 60% increase from the previous year’s period. Even still, given BYD’s recent growth rate—BEV sales from April to June 2023 quadrupled from last year—this represents a decline. For comparison, BYD’s annual BEV sales in 2023 were slightly less than Tesla’s at 1,575,000 units, but this was a more than 70% increase from the previous year.
Behind this explosive growth, the price of BEVs sold by BYD is lower than Tesla’s, and it also has the geographical advantage of being a local manufacturer in China, the world’s largest auto market, and the most proactive in promoting BEVs. In other words, it was only a matter of time before BYD overtook Tesla.
However, Tesla is not sitting idle. Tesla is developing a low-cost BEV following the Cybertruck, which will be released around 2025. Although Tesla has fewer new cars than BYD, one of Tesla’s strategies is to save on development and manufacturing expenses by minimizing the number of models and model iterations. Therefore, in addition to the mass production and profitability of the Cybertruck, Tesla aims to continue to secure profit margins with the Model 3 and Model Y this year. However, this is expected to be realized after 2025.
In its recent earnings announcement, Tesla acknowledged that “the growth rate of production in 2024 could be much lower than in 2023,” so now may be the time to get ready to initiate a new phase of fast expansion. Tesla also plans to establish a factory in Mexico, its fourth production base after the U.S., China, and Germany. In addition to the anticipated release of the low-cost new BEV and the assurance of Cybertruck’s profitability in 2025, constructing a new plant in Mexico—expected to begin operations in 2026—is also anticipated to facilitate Tesla’s potential for rapid growth again.
On the other hand, BYD is building its first overseas production plant in Thailand and plans to start its operation in 2024. In addition, it is also diligently preparing for the next plant in Indonesia. Although it is unclear whether BYD can expand its business in the North American market or the EU market at its current pace due to China’s current political conflicts against the U.S. and European countries, it is establishing a foothold in Southeast Asia, which is proactively promoting BEVs following China.
BYD also produces plug-in hybrid electric vehicles (PHEVs) and BEVs. It is expected to account for half of the annual sales of 3,024,400 units in 2023 (the largest scale among Chinese companies and is within the top 10 in the world), which means that more than half of the total production is already BEVs. BYD’s operating profit margin is in the 6% range. BYD and Tesla are the only automakers worldwide profiting solely from the BEV market. The world will see a “BYD vs. Tesla” showdown.
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