Author: ED CARSON
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Tesla (TSLA) and BYD (BYDDF) are the world’s largest electric-vehicle makers, becoming more direct competitors in China and much of the world.
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A lot of attention is focused on EV startups such as Nio (NIO), Li Auto (LI), Xpeng (XPEV), Rivian (RIVN) and Lucid (LCID). Efforts by traditional auto giants such as General Motors (GM), Ford Motor (F) and Volkswagen (VWAGY) also get coverage. However, Tesla and BYD stand apart.
At one point, the idea of China’s BYD competing with Tesla would have seemed laughable, and indeed Elon Musk did laugh at the idea back in 2011. But when that video clip circulated again on Twitter recently, Musk tweeted back. “That was many years ago. Their cars are highly competitive these days.”
In 2022, China EV and battery giant BYD’s vehicle sales raced ahead of Tesla’s. For all-battery electric vehicles (BEVs), Tesla remains No. 1.
In 2023, Tesla has slashed prices multiple times, as demand struggled to keep up with booming production capacity. Chinese EV makers have made their own cuts, including BYD.
Tesla earnings fell solidly in the first quarter, with gross margins plunging. BYD reported booming Q1 earnings growth vs. a year earlier, though profit and sales fell vs Q4.
Tesla has just four models, with the bulk of its sales the Model Y crossover SUV. The EV giant is expected to begin Cybertruck later this year and perhaps unveil a revamped Model 3. But there are still few details about prices, specs or when mass production might begin. Musk has teased a next-generation model, but little more than that.
BYD has an ever-growing lineup, with EVs from $11,000 to $160,000. New and refreshed models are commonplace.
Meanwhile, BYD has started supplying batteries to Tesla, making these two archrivals frenemies too.
Tesla stock boomed in early 2023 after a terrible 2022. After consolidating for several months, TSLA is rallying again, closing in on buy points.
BYD has done well in 2023, and has been flirting with a buy zone.
Let’s take a look at BYD vs. Tesla, as well as BYDDF stock vs. TSLA stock.
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Tesla Vs. BYD Sales In 2023
Tesla deliveries in the first quarter hit a record 422,875, up 36% vs. a year earlier. But they only rose 4% vs. the fourth quarter, despite big Tesla price cuts and U.S. EV tax credits. Deliveries included 412,180 Model 3 and Y vehicles, along with 10,695 Model S and X luxury vehicles.
Output reached 440,808, topping sales yet again. Model S and X production was 19,437.
The Model Y was the best-selling vehicle in Q1, the first time an EV has done so.
Model Y sales in the U.S. are doing fine Q2, buoyed by price cuts. Tesla sales in Europe and China also were good in April, but that might reflect now-ample supply to start the quarter, vs. truly robust demand.
On May 2, BYD reported April sales of 210,295 vehicles, up slightly from March’s 207,080, but still down substantially vs. December.
Of the 209,467 personal vehicles, BYD sold 104,364 BEVs and 105,103 plug-in hybrid vehicles (PHEVs).
While Tesla leads BYD in BEV sales globally, the latter is No. 1 in China. In fact, BYD is now China’s largest automaker, period.
There’s no doubt that the Tesla-led EV price war has taken a toll on BYD, especially vehicles such as the Han and Seal. But sales are beginning to pick up, with refreshed models that often come with lower prices.
Tesla Price Cuts
Tesla slashed prices worldwide in January, with further cuts in most markets since then, including in April.
The price cuts have made Model 3 and Y vehicles eligible for new U.S. tax credits. All get $7,500 except for the entry-level Model 3, which gets $3,750.
China EV makers have slashed prices in response to Tesla and a general production cut. BYD resisted at first but has become more aggressive in the past several weeks. BYD and rivals are rolling out a slew of new models, many of which will take on Tesla vehicles.
Tesla raised official U.S. prices slightly twice in May. It’s also slightly raised prices in some other key markets, including China. Some Model S and X price hikes have come with Supercharging or cheaper financing. Tesla may be trying to get possible buyers to act vs. waiting for further price cuts.
U.S. Model Y demand has been strong, though recent price upticks appear to have cooled order demand.
Tesla recently began offering substantial Model 3 and Y discounts in Europe on inventory vehicles. It’s also offering significant Model 3 inventory discounts in the U.S. and now Canada.
Tesla Cybertruck, Model 3 Revamp
The oft-delayed Cybertruck is expected to begin early production sometime this summer. That will be the EV maker’s first new vehicle since the Model Y launched in early 2020. But volume production may not begin until 2024, while 4680 battery production issues could limit output. Tesla still hasn’t released Cybertruck prices and specs. The Cybertruck is likely to largely be a North American vehicle, so Tesla may not have a new vehicle for most markets until 2025 or beyond.
Tesla is close to starting trial production of a revamped Model 3 in Shanghai, Bloomberg reported May 16. It’s unclear when real output will begin in China and later in the U.S. There are reports the Shanghai plant is reducing output temporarily. That could be for getting ready for an updated Model 3, or due to a supply-demand imbalance — or both.
Tesla has said it plans to have a new, next-generation EV, but hasn’t even shown images yet. Tesla plans to to build an EV plant in northeastern Mexico that will make the next-gen vehicle. A lower-priced model could up huge new markets. But even now, a cheaper Tesla would face a slew of rival models, including several from BYD.
At the Tesla shareholder event, Elon Musk didn’t offer much news about these upcoming new or revamped vehicles.
Tesla has handed over a few dozen Semi trucks to PepsiCo (PEP) starting late last year, but has declared any Semi deliveries yet. Big-rig makers’ key customers often run new models through extensive shakedown trials. That may be what Tesla and Pepsi are doing, but with a lot more publicity.
Tesla Production
Tesla production capacity continues to ramp up its Berlin and Austin plants after significantly expanding its mammoth Shanghai factory last year.
But demand hasn’t kept up with expanded output, even with Tesla slashing prices and curbing production below capacity.
With Berlin ramping up and backlogs dwindling, Tesla Shanghai no longer needs to export many Model Y vehicles to Europe. It’s begun shipping some made-in-China Model Y and 3 vehicles to Canada. But that comes at the expense of Tesla’s U.S. plants, and Canada discounts are already appearing.
Tesla has applied for yet another expansion of its Shanghai facility, Reuters reported. That would let production eventually rise to 1.75 million from the current capacity of 1.25 million.
Tesla plans to build a new plant in northeastern Mexico. That site probably won’t be up and running before late 2024. It will make Tesla’s next-generation vehicle. It’s unclear if it’ll make other Tesla models.
Tesla is entering Thailand, following BYD. It’ll be a test to see how much demand Tesla can have in middle-income countries besides China. A cheaper Tesla model would likely be helpful in such markets.
Tesla aims to produce 1.8 million vehicles in 2023, though capacity is higher. It has not set a delivery target.
BYD Expansion
BYD is ramping up EV and battery production, with more China plants coming on line this year. It’s already building an EV factory in Thailand, with that set to begin production in 2024. Vietnam said on May 8 that BYD will make EVs in that country as well. BYD also is expected to build or buy plants in Europe and Brazil. In late May, BYD reached a deal to set up some operations in Indonesia.
BYD has forecast selling at least three million vehicles for the full year, with hopes for 3.6 million, nearly doubling vs. 2022. Sales are well off that pace so far, in part due to the China EV price spurred by Tesla.
But BYD has hopes for ramping up sales.
BYD has unveiled several new models. The small Seagull starts at around $10,700, with deliveries starting around mid-year. The Destroyer 07 mid-size PHEV sedan will probably start around $30,000. BYD’s upscale Denza brand will release the N7 crossover over the summer, with a price target likely at $50,000 or above. BYD’s super-premium brand Yangwang said its U8 off-road vehicle will start at $160,000, with deliveries beginning in the third quarter.
BYD also plans another “personalized” brand in 2023, likely starting with a pickup. The “F Brand” is expected to price above Denza but below Yangwang.
A newly updated BYD Seal comes with substantially lower prices.
BYD is expanding massively overseas. Thailand has become a big market, but has entered many Asian countries, including Japan, India, Malaysia, Australia, Singapore and more. It’s also entered most European countries. BYD also is entering Mexico this year, as part of a big push throughout Latin America.
BYD has led its export push primarily with the Atto 3 small SUV, but will add more models overseas in the coming month, including the Dolphin hatchback and Seal sedan.
Exports are still a small share of sales, but growing rapidly from almost nothing in mid-2022. That’s expected to ramp up further in late 2023.
BYD has said it doesn’t yet plan to enter the U.S. market for personal vehicles, though it does build EV buses in Lancaster, California.
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Tesla Vs. BYD Batteries
Tesla traditionally has not mass produced its own batteries. For lithium-ion batteries, its joint venture partner Panasonic makes the cells and Tesla packages them. It also buys lithium-ion batteries from South Korea’s LG. Tesla also has bought lithium iron phosphate (LFP) batteries from China’s CATL.
Tesla is working on 4680 batteries, first touted in late 2020.
The 4680 batteries are standard lithium-ion chemistry, but the larger form factor offers the potential for various benefits and cost savings. Tesla’s 4680 pilot program has picked up output in recent months.
But it’s unclear if Tesla has solved key technical hurdles to allow for mass production and cost savings for the 4680 battery. It’s also not clear if some of the battery benefits are coming to fruition.
Panasonic, which was going to help ramp up 4680 production, has pushed back output to late 2024 vs. late 2023.
Tesla reportedly is mulling a new U.S. battery plant with the help of China’s CATL, which provides the bulk of its batteries in China. CATL recently reached a similar deal with Ford. Tesla plans a new facility in Shanghai to make Megapack large-scale battery storage units, presumably using CATL batteries.
BYD, meanwhile, is one of the world’s largest EV battery makers. Its Blade batteries are a specialized LFP. BYD is ramping up battery plants to supply third-party EV makers as well as storage, above and beyond its own EV needs.
In fact, Tesla is now using BYD battery packs for a lower-range Model Y variant at its Berlin plant. That follows months of unconfirmed BYD Blade supply deals with Tesla.
BYD, like CATL and some others, is working on sodium-ion batteries. Those could be useful in smaller EV vehicles as well as energy storage. It’s reported that BYD will offer sodium-ion batteries in the Seagull EV down the road, further cutting the cost.
Both Tesla and BYD are expanding in battery storage for home or business applications or utility-scale projects, though Tesla gets its batteries from CATL.
With Tesla’s auto margins falling, bulls are betting on huge profits from a booming storage business.
Tesla, BYD Other Businesses
Tesla has its own Supercharger network in its markets. That’s especially important in the U.S. and countries like Australia, where third-party charging facilities are limited.
Tesla is starting to open up its Superchargers to other EVs. On May 25, Tesla and Ford reached a deal to give Ford EV customers access to Superchargers, with Ford planning to adopt Tesla’s charger standard.
Tesla also has a solar installation business.
Tesla’s self-driving ambitions continue. Autopilot and Full Self-Driving help bolster Tesla’s image of cutting-edge technology, while the $15,000 FSD is a key source of revenue and profit, especially in the U.S. However, even FSD Beta remains a Level 2 driver-assistance system vs. a Level 4 or 5 fully autonomous system. U.S. regulators are investigating dozens of crashes involving Tesla Autopilot or FSD, with civilian and criminal probes.
BYD, notably, makes its own chips. That, along with the in-house batteries and other vertical integrations, helped BYD expand rapidly in the past two years as many rivals struggled from chip and other supply shortages.
The EV and battery giant also has solar operations.
BYD will introduce Level 2 driver-assistance systems in its Yangwang and Denza vehicles, as well as some BYD-brand EVs. It has relationships with Baidu (BIDU), Nvidia (NVDA) as well as several local players.
BYD Co. is largely known for its BYD Auto operations. BYD Electronics, which accounts for an increasingly smaller share of overall revenue, is involved in mostly low-margin business such as smartphone components and assembly.
Tesla Vs. BYD Earnings
Tesla earnings per share fell 21% in the first quarter vs. a year earlier, in line with views. Revenue grew 24% to $23.3 billion, slightly missing.
Tesla’s gross margin tumbled to 19.1%, worse than expected, from 23.8% in Q4 and 29.1% a year earlier.
Auto gross margins excluding regulatory credits and leases skidded to 18.3% from 23.8% in Q4. Tesla had said 20% would be a “floor” for this metric in 2023.
Free cash flow tumbled 80% vs. a year earlier to $441 million vs. expectations for $3.2 billion. Tesla had negative cash flow excluding $521 million in auto regulatory credits.
Musk said that he’s going to stress higher production over margins, indicating further price cuts could be ahead. He said Tesla will reap higher margins when it achieves full sell-driving. Musk said he expects Tesla to achieve full autonomy in 2023. He’s forecast full autonomy for several years.
BYD earnings are booming.
On April 27, BYD reported Q1 net profit surged 411% vs. a year earlier, while revenue jumped nearly 80%. But earnings and sales were down substantially vs. Q4 2022. Some of that reflects a seasonally slow first quarter, which includes China New Year. But it also reflects the impact of a fierce China EV price war.
BYD’s gross margin was 17.9% in Q1, down from 19% in the prior two quarters. BYD Auto gross margin was 20.7%, down 22.8% in the prior two quarters but up from 15.6% in Q1 2022.
Tesla Stock Technicals
Tesla stock plunged 65% in 2022, according to MarketSmith analysis. Shares are now up 56.8% in 2023.
TSLA stock hit a 2023 high of 217.65 on Feb. 16. A brief breakout on March 31 quickly failed following deliveries, with shares continuing to slide below the 50-day line. After tumbling to a three-month low, TSLA stock is trying to recover, but still below the 21-day, 50-day and 200-day lines. Tesla hit resistance at the 21-day and near the 50-day line on May 12.
Elon Musk on May 12 announced that Linda Yaccarino, who just stepped down as NBC Universal’s ad chief, will be Twitter CEO. That may give Musk more time to focus on Tesla, though he’ll still be actively involved with the social site.
Meanwhile, while Musk didn’t reveal much at the shareholder event May 16, he didn’t emphasize price cuts either. The EV giant’s use of discounts and incentives to drive sales doesn’t appear to raise investor concerns the way that “price cuts” do.
In late May, a whistleblower leaked a massive amount of Tesla internal documents. That raised concerns about Tesla’s privacy and security controls, perhaps running afoul of strict European regulations. The documents also have a wealth of info about customer complaints and accident data, as well as instructions to interact with customers directly to avoid a paper trail. But that doesn’t appear to have had an impact on TSLA stock.
Tesla stock has rebounded from late April lows to clear the 50-day line and come up to resistance at the 200-day line. The EV giant has a 207.89 buy point, just above the March 31 high. That’s either from a two-month cup-base or a three-month double-bottom consolidation. That has all taken place below the 200-day moving average, which is not a good sign. But the 200-day has now fallen to about 200. So a Tesla breakout would also mean decisively clearly that long-term resistance level.
BYD Stock Technicals
BYD stock slumped 27.7% in 2022, but is up 21.4% in 2023.
Shares rose sharply in January, but sold off hard in February and early March, tumbling well below the 200- and 50-day lines.
On May 10, BYD stock cleared a cup-with-handle base buy point of 31.17 on May 10. But on May 25, shares fell back. Great Wall Motor accused two BYD plug-in hybrid vehicles of failing China’s emissions standards. BYD has denied the claim.
Warren Buffett’s Berkshire Hathaway (BRKB) has been a longtime major investor in BYD. But Berkshire has sold slices of its H-shares in BYD in 11 moves, starting in late August. The latest, on May 2, was disclosed on May 8. Berkshire still owns about 5% of BYD, based on all share classes, but has halved its stake.
Tesla Vs. BYD Market Cap
Tesla stock has a market cap of $612.2 billion as of May 26, off its peak valuation above $1 trillion but well above early January lows. That’s far above BYD’s $81.4 billion.
BYD stock is listed in Hong Kong and Shenzhen, and only trades over the counter in the U.S. That also means the BYDDF stock chart shows a lot of minigaps.
Tesla Stock Vs. BYD Stock
BYD is still the upstart vs. Tesla in terms of pure electric vehicles and premium pricing, but the “BEV” title is in sight while the price gap is narrowing. More broadly, BYD in many ways is the EV maker Tesla has claimed or aspired to be. BYD makes its own batteries and chips, and sells those batteries to third parties such as Tesla. Musk has talked about making a $25,000 Tesla; BYD makes EVs profitably at $25,000 — and far less.
With Tesla no longer “production constrained,” it’s shifting to price cuts and incentives to support demand. But it calls into question the super-bull hopes for 20 million EVs sold in 2030. Likewise, skepticism has grown about Tesla’s self-driving efforts.
BYD has expanded in several big markets, with that effort key to its efforts to be a global auto giant. Its model lineup continues to expand dramatically, including big moves upscale.
Tesla may introduce its Cybertruck pickup in late 2023, its first new passenger model in over three years, but with a lot of unknowns. A next-generation vehicle may not arrive until 2025.
Tesla stock had a horrible 2022, while BYD stock fared badly too. Tesla surged to start 2023, and is setting up again near a new buy point. BYD stock is just below a buy point.
Both EV giants are delivering far more electric vehicles than rivals. Tesla profits have recently faltered. BYD earnings continue to surge vs. a year earlier, but the price war may also slow earnings growth.
So keep your eyes on BYD and Tesla in 2023, as well as Tesla stock vs. BYD stock.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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