Elon Musk’s Tesla was the clear global leader in electric vehicle sales at the start of 2022, powered by booming demand and profit from the fast-growing Chinese market. But in the first six months of the year, China-based BYD is emerging as a formidable new competitor with total sales–including plug-in hybrid models–that topped the U.S. EV pioneer.
BYD, which counts Warren Buffett’s Berkshire Hathaway as a long-time investor, delivered 641,350 EVs and plug-in hybrids to customers in the first half, up 315% from a year ago, compared with Tesla’s 564,743, up 46%. Tesla’s sales of battery-only models kept it ahead of BYD on that basis (in June, for example, 64,218 of the 133,036 “new energy” consumer vehicles BYD sold were plug-in hybrids). Still, its lead appears to be shrinking as its Shenzhen-based rival and other Chinese competitors such as fast-growing XPeng and NIO ramp up production, especially of higher-end models that compete directly with Tesla’s.
“First half of 2022 we delivered total sales exceeding 640,000 units,” the company tweeted on July 3.
Notably, BYD seems to have been less impacted by dramatic Covid-related lockdowns that slowed production at Tesla’s Shanghai plant to a crawl in April and May.
Gains by Chinese EV makers are hardly surprising given how vast that market has become. In 2021 EV sales in China, including plug-in hybrids, hit 3.3 million units, dwarfing the 608,000 EVs and plug-ins bought by U.S. consumers. Aggressive government policies have encouraged those sales, but China has also had a wide range of smaller, lower-cost EVs such as BYD’s attractive Han sedan that’s priced from about $32,800. By comparison, affordability remains a big challenge for potential buyers in the U.S. where the current average transaction price for a battery-powered model tops $64,000, according to Kelley Blue Book–reflecting Tesla’s U.S. dominance of that segment.
“Emerging China EV companies are making a concerted effort to target the premium end of the local market and eventually abroad,” Deutsche Bank equity analyst Edison Yu said in a research note. “We are already witnessing intense domestic competition in the mass market from Leap Motor, Hozon Neta, WM Motor, BYD, and numerous sub-brands from incumbent OEMs (GAC/Aion, BAIC/Arcfox, SAIC/R-brand). Newer entrants have shown willingness to absorb deep losses to quickly gain volume share.”
Like BYD NIO, inspired by Tesla’s business model, has also posted steady sales gains in China this year, aided by new products like its electric ES7 SUV that went on sale last month, priced from about $69,000. The company this month said its EV sales were up 14% to 25,059 in the first half.
Analysts generally expect Tesla’s production pace to accelerate in the second half of 2022, aided by the addition of new plants in Germany and Texas, though output has temporarily slowed again ag Giga Shanghai and Giga Berlin as those facilities are modified to boost production capacity.
Among major automakers, Volkswagen and the Hyundai-Kia group are also increasing competition for Tesla in global markets as newer Chinese players look to expand sales in Europe and in Asian markets. Longer-term, General Motors and Ford aim to cut into Tesla’s U.S. dominance with aggressive plans to boost production and sales of a broad range of EVs. GM is looking at mass-market buyers with the surprisingly affordable 2023 Chevrolet Bolt EV, starting at $26,595, as well as premium buyers with the $62,000 Cadillac Lyriq SUVs and $109,000 Hummer EV. Ford’s F-150 Lightning pickup, a battery-powered version of the top-selling U.S. vehicle, is priced from $39,974 and its Mustang Mach-E crossover, with a $43,895 base price, is cheaper than Tesla’s entry-level Model 3 sedan, priced from $46,990.
With its luxury-priced vehicle line and the possibility of a recession in the U.S. and Europe from late this year, Tesla may face lower demand toward the end of 2022.
“The elephant in the room for Tesla (and the broader market) is with dark economic storm clouds on the horizon and Musk himself thinking recession risk is imminent, what does this mean for Tesla’s demand story going forward?” Wedbush analyst Dan Ives wrote. “While the softer macro will clearly impact demand around the edges in the coming quarters, we believe Tesla has ample demand capacity to hit ~2 million units in 2023 globally with production capacity that can exceed this number when factoring in Austin and Berlin to a normalized China production target.”
Tesla also faces new competition in the U.S. from newer competitors including Lucid, Fisker Inc. and Rivian, if they can ramp up production through 2023 and navigate ongoing supply chain headaches and rising costs for raw materials and components.
Rivian, for example, reassured investors on Wednesday noting that it still expects to deliver at least 25,000 electric pickups, SUVs and delivery trucks this year. That triggered an 11% jump in its stock price to $29.77 in afternoon Nasdaq trading on Wednesday. Shares of Tesla were down about 1.4% to $689.25 in afternoon Nasdaq trading.
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