BEIJING – A less flashy Chinese electric vehicle maker is quickly closing the gap on Tesla, the longtime market-leading pioneer.
BYD Co., based in the southern Chinese tech hub of Shenzhen, has dethroned Texas-based Tesla Inc. as the top seller of electric cars in the final three months of 2023, according to sales figures released by the companies this week.
Tesla retained the crown for all of 2023, but BYD's sales have skyrocketed due to a government-driven electric boom in China. The rise of BYD and other Chinese electric vehicle makers poses a challenge not only to Tesla, but also to the world's largest automakers, as Chinese competitors head to Europe, Southeast Asia and others with a relatively affordable option for drivers who want to drive in a green way Penetrate overseas markets.
Automakers such as Volkswagen, Ford, Honda and Toyota are all catching up with both BYD and Tesla, said James Attwood, acting editor-in-chief of Autocar magazine.
“I think the most interesting thing is perhaps less the battle between Tesla and BYD and more about what the big established manufacturers with a hundred-year history of making cars will do to catch these upstarts,” he said.
How did BYD outsell Tesla?
By aggressively cutting prices, Tesla beat analysts' revenue estimates in the October-December quarter, but BYD did even better. The Chinese automaker sold 526,409 electric cars in the three-month period, surpassing Tesla's 484,507 units.
Its results were boosted by a surge in sales of small, low-cost electric vehicles such as the Seagull and Dolphin models, said Cui Dongshu, secretary general of the China Passenger Car Association. Whether this growth in small vehicles is sustainable remains to be seen, he said.
For the full year, BYD's electric vehicle sales rose 73% to nearly 1.6 million vehicles in 2023, the company said in a filing with the Hong Kong Stock Exchange on Monday. The total still lagged behind Tesla, which announced the next day that its annual sales rose 38% to 1.8 million cars.
Unlike Tesla, BYD also produces hybrid vehicles. Including its 1.4 million hybrid vehicles, BYD significantly outperformed its American competitor with sales of 3 million cars in 2023.
China's electric vehicle subsidies were scrapped earlier this year, but a fierce price war between manufacturers including BYD and Tesla ensured sales continued. China is an important market and manufacturing base for Tesla, which exports cars from China to Europe and elsewhere.
What's next for BYD?
BYD's growth took place primarily domestically, where the company benefited from the huge Chinese market and government policies to promote the electric vehicle industry. It competes with Tesla in size, but is not yet within reach.
“Most of BYD's electric vehicles were sold in China, despite fast-growing overseas sales, while Tesla is already a global player,” said Jing Yang, director of China corporate research at Fitch Ratings.
The company is expanding into new markets. Its exports more than quadrupled to 242,765 vehicles in 2023, accounting for 8% of its sales, and BYD announced last month it would build an electric vehicle factory in Hungary, its first in Europe.
Chinese electric vehicle makers are still early in their involvement abroad and could face regulatory or trade barriers, Yang said, particularly in markets home to major automakers such as the United States, Europe, Japan and South Korea.
The EU has opened a trade investigation into subsidies for electric vehicle makers in China, and the U.S. has passed a law that bars consumers from getting the full $7,500 tax credit for an electric vehicle if its battery components come from China and some other countries come.
“The main concern for global automakers is the influx of cheap Chinese electric vehicles into their home markets and other large markets before they can produce electric vehicles at lower costs,” Yang said.
How did BYD get its name?
Company founder Wang Chuanfu said BYD, or “Biyadi” in Chinese, was chosen primarily because it was a simple and unusual name, two characteristics that make it easier a new company in China.
At that time, Wang founded a rechargeable battery manufacturer in Shenzhen in 1995. From batteries, BYD expanded into other areas, including consumer electronics. BYD founded an automotive subsidiary in 2003 that initially manufactured gasoline-powered cars. In 2008, Wang turned his attention to the electric vehicle market.
BYD has stopped producing gasoline cars. It also makes electric buses, including at a U.S. factory in Lancaster, California. While the origin of its name is unclear, the company has turned its acronym into a slogan: “Build Your Dreams.”
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Associated Press researcher Yu Bing in Beijing and video journalist Cassandra Allwood in London contributed.