China’s BYD surpassed Tesla in quarterly deliveries for the first time

In the final quarter of 2023, BYD surpassed Tesla for the first time, establishing itself as the world’s largest electric car producer. The Chinese firm tallied record-breaking sales last year, including 525,409 battery electric vehicles (BEVs) in the quarter leading up to December 31, as revealed in a stock exchange filing.

On Tuesday, Tesla announced record deliveries of 484,507 vehicles during the same period. However, across the entire year, Elon Musk’s Tesla continued to lead BYD, selling 1.8 million electric cars. In contrast, BYD sold 1.57 million electric vehicles, marking a 73% increase, as well as an additional 1.44 million hybrids.

The competitive chasm between Tesla and its Chinese competitor, BYD, notably narrowed in 2023, with the gap being trimmed down to approximately 230,000 units compared to the 400,000-unit divide in 2022.

Emblematic of China’s burgeoning EV market, BYD’s rapid expansion has been significantly supported by Warren Buffett. This is reflective of China making significant strides in the shift towards electric vehicles, a transition bolstered by robust government backing of the industry.

The Chinese government has set ambitious targets for the growth of the sector. It stipulates that new energy vehicles (NEVs), encapsulating BEVs, plug-in hybrids, and hydrogen fuel cell vehicles, should make up at least 20% of new car sales annually by 2025. Further, it expects NEVs to become the predominant nature of new vehicle sales by 2035.

Remarkably, the initial target was accomplished in 2022, an impressive three years ahead of schedule. The progression suggests that the subsequent goal may likewise be realized sooner than projected.

In the initial 11 months of 2023, sales of new energy vehicles hit 8.3 million units, representing over 30% of total car sales, according to data unveiled last month by the China Association of Auto Manufacturers.

Miao Wei, the former minister of China’s Ministry of Industry and Information Technology, proclaimed in November at a car forum that the government’s target of achieving 50% penetration of new energy vehicles by 2035 will most likely be realized as early as 2025 or 2026 at the latest, as stated by state media.

Analysts attribute China’s forerunning position in the global industry to several factors, including the country’s large market size, affordable labor force, and dominance in the supply chain.

“Currently, China is not only spearheading production but also bolstering its competitive advantages, leveraging its vast domestic market and the benefits of being a first mover,” wrote analysts from Natixis Asia, a French investment bank, in a late November report.

They noted that China’s pioneering advantage, along with government backing through infrastructure investment and subsidies, have facilitated the expansion of Chinese EV manufacturers domestically and internationally.

However, it’s worth noting that the heightened competition and a harsh price war that unfolded last year have adversely affected the profit margins of numerous car manufacturers.

Confronted with a slowing economy, automakers in China grew worried about a potential slump in demand. In an effort to attract customers and counter decreasing growth, Tesla lowered its prices in China beginning in January, instigating a price war. In response to this, dozens of automakers followed suit to maintain their competitiveness.

While the price war spurred an increase in sales, it threatened the profitability of the entire industry. For example, in the first 11 months of the previous year, the car industry in China only managed a profit margin of a mere 5%, which fell short of the 5.7% in 2022 and 6.1% in 2021, according to data released last week by the Chinese Passenger Car Association, a government-associated industry group.

In an attempt to counterbalance the declining domestic market, Chinese automakers, including BYD, have been exploring growth opportunities beyond China’s mainland by expanding into Europe, Australia, and Southeast Asia.

Last month, BYD declared its plans to establish an EV factory in Hungary, marking its first passenger vehicle plant in Europe. This comes in addition to the company’s existing bus production facility in Komarom, Hungary.