Is Tesla Losing To BYD In The Electric Vehicle Race?

Tesla's gross margin in the second quarter of 2024 reached a new low, marking a continued decline since Q1 2022. Despite this, Tesla maintained its position as the global leader in battery electric vehicle (BEV) market share, driven by an increase in deliveries.

The competition between Tesla and BYD, another major player in the electric vehicle (EV) market, remains intense. In the latest quarter, Tesla delivered 443,956 vehicles, surpassing BYD's 426,039 vehicles. However, the focus has shifted from just delivery numbers to other crucial metrics such as unit price and margins. Tesla's higher prices help maintain a lead in operating margins at over 9%, compared to BYD's 5%.

Tesla’s higher-priced models faced challenges, with deliveries of the Model S, Model X, and Cybertruck falling short of market expectations. Conversely, deliveries of Tesla's more affordable models, the Model 3 and Model Y, exceeded expectations. This underscores the growing importance of offering a wide price range in the EV market, especially as many fast-growing EV markets are in emerging economies.

BYD has leveraged its vertically integrated supply chain to reduce costs, allowing it to offer competitively priced models. The company saw a significant boost in deliveries after reducing prices in March. This strategy has helped BYD capture nearly half of the EV market share in Thailand, highlighting the impact of affordable pricing on market growth.

The competition in the EV market is further intensified by advancements in technology. Chinese companies like Nio are challenging Tesla's edge in software and intelligent driving technology. The range of lower-priced models, such as BYD's Seagull, which offers up to 405 km on a single charge, also challenges Tesla's differentiation based on battery range.

Tesla’s stock trades at a significant premium compared to BYD, reflecting expectations for its other businesses like battery storage systems. However, as EV markets become more saturated, expanding Tesla’s model range to include lower-priced options could help justify its premium valuation.

In Singapore, BYD has widened its sales lead over Tesla in the first half of 2024, with EV sales jumping 83% from the previous year. BYD's aggressive expansion in Southeast Asia, including opening new stores in Vietnam, contrasts with Tesla's more modest presence in the region. BYD's marketing efforts, such as opening themed restaurants in Singapore, have further boosted its visibility and sales.

​As the global EV market continues to grow, with 70% of the 14 million EVs sold in 2023 being BEVs, Tesla and BYD's strategies highlight the importance of price, market-specific approaches, and technological advancements in maintaining and expanding market share.