Tesla (TSLA) and BYD (BYDDF) are the world’s largest electric-vehicle makers.
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Tesla Is Struggling. Here’s What Elon Musk Is Betting On For Future Growth.
In 2022, China EV and battery giant BYD’s vehicle sales raced ahead of Tesla’s. For all-battery electric vehicles (BEVs), BYD seized the crown in Q4 2023. Tesla regained that title in Q1 2024, but could soon lose that again.
Next week both automakers should report a bounce in second-quarter sales vs. the first quarter, which saw a big drop vs. Q4 2023, partly due to seasonal China weakness.
BYD should report record sales overall, possibly hitting one million for the quarter. Price cuts earlier in the year and a next-generation hybrid system have fueled sales. It’s opening up its first factories outside of China.
Tesla has slashed prices since late 2022, but demand is flagging as its lineup ages. Tesla recently announced plans for “affordable” EVs, but the EV giant apparently has shelved plans for any all-new vehicles for years to come.
Elon Musk is placing a renewed emphasis on robotaxis, as well as robotics and artificial intelligence. It’s unclear when such goals will be achieved, especially in the next few years.
The European Union announced sharp new tariffs on Chinese-made BEV vehicles, which will impact Tesla and BYD.
Tesla stock broke out into a buy zone, though with some caveats. It’s still down significantly in 2024.
BYD stock is just below 2024 highs, close to a buy area. It’s the only EV stock of note that’s up this year.
Let’s take a look at BYD vs. Tesla, as well as BYDDF stock vs. TSLA stock.
Tesla Vs. BYD Sales
Elon Musk said on the Q1 earnings call that he expects Tesla deliveries will rise in 2024. That may be optimistic given the trend so far.
Tesla delivered 386,810 vehicles in Q1, far below even the most bearish views. That was down sharply from Q4 2023’s record 484,507 EVs and off 8.5% vs. a year earlier.
The majority of Tesla sales are for the crossover Model Y.
Second-quarter sales should rise vs. Q1, but be down substantially vs. a year earlier.
BYD announced first-quarter sales of 626,236 EVs, including 300,114 passenger BEVs. That was down sharply from Q4’s 944,779 but up 13.4% vs. a year earlier. After a dismal start to 2024, BYD sold 302,459 in March alone, including 139,902 BEVs.
May sales picked up to 331,817, slightly below December’s record 341,043. However, the three-month total of 947,521 did mark a new high.
June sales could top December’s record, with an outside chance that Q2 sales will top one million. Plug-in hybrids have been leading the way.
Even so, BYD looks set to reclaim the BEV crown from Tesla in Q2.
Tesla, BYD Cutting Prices
Tesla has slashed prices worldwide starting in late 2022. Initially, these price cuts were viewed at least somewhat as proactive moves to grab market share and undercut rivals. But the EV giant has had to keep cutting prices to prop sales, slashing once-mighty profit margins and earnings. In Q1 2024 deliveries and revenue fell vs. a year earlier, with that likely to continue in Q2.
While Tesla has at times nudged prices higher, the general trend has been lower.
Earlier in 2024, BYD slashed prices on most of its largely refreshed models, helping to revive sales. But that hasn’t been at the expense of margins.
Tesla Models
Tesla produces the Model 3, the Model Y, Model X and Model S, as well as the Semi and Cybertruck. The Model Y crossover accounts for the majority of sales.
A Model 3 revamp didn’t provide much of a sales boost in China and Europe and has been lackluster in the U.S.
The Cybertruck has been produced in relatively low volume, in part due to quality issues. The Cybertruck, which probably is not profitable yet, is likely to be largely a North American vehicle.
Tesla has delivered a few dozen Semi vehicles to PepsiCo (PEP). By May 2024, a few more customers, including Walmart (WMT), had taken possession of at least one Tesla Semi. But it’s still unclear what the specs and price for the EV big rig are. Tesla recently said it expected mass production in 2026, but Semi timelines have often slipped by years.
Tesla ‘Affordable Vehicles’ And Robotaxi
On the Q1 earnings call, the EV giant ditched long-touted plans for a “next-generation” EV and “revolutionary” manufacturing. Tesla now plans “affordable vehicles,” using existing production lines. Elon Musk said test production might happen in early 2025 or even before the end of 2024.
Given the timeline — which could slip — the speculation is that Tesla will produce a lower-cost variant of the Model 3 or Model Y, perhaps a hatchback. IRA-compliant batteries would be key for such a vehicle in the U.S. But it’s unclear how a low-end Model 3 might fare elsewhere, especially in China.
Meanwhile, Elon Musk has made a stronger push for robotaxis. He plans a robotaxi event on Aug. 8, though it’s unclear what that will entail.
The conventional wisdom is that Tesla will unveil a prototype with no steering wheel. Tesla has suggested a robotaxi app would be coming, though likely only becoming operational when self-driving is achieved. But Tesla’s Full Self-Driving, despite its name, remains a Level 2 system that requires a human driver.
JPMorgan recently said it expects no robotaxi revenue for years, citing conversations it had with Tesla investor relations.
BYD Expansion
BYD sells BEVs and PHEVs from around $10,000 to $150,000, with a wide range of models. It’s refreshing much of its lineup, while adding several new models. That includes new models for its premium Denza, FangChengBao and Yangwang brands.
It’s unveiling several new models with driver-assist systems, faster charging and improved hybrid systems.
On May 28, BYD unveiled a new fifth-generation hybrid system with greater efficiency. The EV giant touted 2,100 kilometers (1,305 miles) in combined battery-and-gas range, slightly higher than expected. But real-world driving tests hit 2,500 kilometers or even better.
The affordable Qin L and Seal 06 sedans are the first PHEVs with the new system, with deliveries starting before the end of May. Orders for those two affordable sedans reportedly are huge.
The system will roll out to other BYD PHEVs in the following months. That comes amid a global shift toward hybrids and away from BEVs.
BYD also is expanding rapidly overseas. Exports are a modest share of overall sales, but growing rapidly as logistics improve. They also carry better margins.
BYD production has just begun at a plant in Uzbekistan. The plant is a knock-down facility, putting together vehicles that were partially assembled in China. A new, full-assembly plant in Thailand is set to start operation on June 30, with a Brazil factory due to open in early 2025.
The EV giant also has plans to build a factory in Hungary and Indonesia. It’s mulling a Mexico site and may set up in Vietnam as well.
BYD has no plans to enter the U.S. passenger EV market, amid import tariffs and political opposition. BYD does make EV buses in California.
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 buys a lot of lithium iron phosphate (LFP) batteries from China’s CATL as well as some LFP batteries from BYD.
Tesla is working on 4680 batteries, first touted at the 2020 Battery Day. 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 production has picked up output in recent months, but is still relatively low.
Tesla still hasn’t solved key technical hurdles to allow for 4680 mass production and cost savings. It’s also not clear if some of the battery benefits are coming to fruition.
If nothing else, the focus on the 4680 batteries meant that Tesla did not focus on expanding production or sourcing of traditional 2170 cells that would comply with IRA tax credit rules.
Tesla is a major battery storage provider, though it gets its batteries from CATL.
BYD, meanwhile, is one of the world’s largest EV battery makers. Its Blade batteries are a specialized form of lithium ferrous phosphate (LFP) or lithium iron phosphate batteries. BYD is ramping up battery plants to supply third-party EV makers as well as storage, above and beyond its own EV needs. Those include battery sales to EV makers Xiaomi, Nio’s Orvo brand and Toyota.
BYD supplies some EV batteries to Tesla Berlin. It reportedly will be a battery supplier to Tesla’s upcoming Shanghai Megapack factory.
BYD, like CATL and some others, is working on sodium-ion batteries. Those could be useful in smaller EV vehicles as well as for energy storage.
BYD reportedly will unveil a next-generation Blade battery in the third quarter.
BYD is a major battery storage provider.
Tesla’s 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 has deals with most automakers for access to Superchargers in the U.S. They’ll also adopt the charger standard Tesla uses. Those deals, and some related charging subsidies, will boost revenue. But they will reduce Tesla’s charging moat in the U.S., which encouraged people to buy its EVs.
But at the end of April, Musk fired the entire Supercharger team, before rehiring some members.
Tesla also has a solar installation business, but it’s been struggling.
Tesla’s self-driving ambitions continue. Musk is doubling down on FSD as the traditional EV business struggles. However, Tesla recently slashed the FSD prices to $8,000 from $12,000, shortly after halving the FSD subscription price to $99 a month from $199.
Tesla has cleared key hurdles for offering FSD in China. But many automakers offer Level 2 systems there, or better.
Tesla also is pursuing a humanoid robot, Optimus, saying he expects it to be a multitrillion business.
“We should be thought of as an AI or robotics company,” Musk told investors. “If somebody doesn’t believe Tesla is going to solve autonomy, I think they should not be an investor.”
Elon Musk diverted thousands of Nvidia chips scheduled for Tesla to his own companies, social site X and AI startup xAI, CNBC reported on June 4, citing internal Nvidia emails. Musk appear to confirm the story in part, posting on X that Tesla wasn’t ready for the chips. But he later said the CNBC reporter is a “liar.”
There have been growing concerns that Musk is favoring X and xAI over Tesla, with xAI poaching a number of staff from the EV giant.
BYD’s Other Businesses
BYD, notably, makes its own chips. That, along with the in-house batteries and other vertical integrations, help make BYD a low-cost EV maker.
The EV and battery giant also has solar operations.
BYD is introducing Level 2 driver-assistance systems in its premium brand models as well as more mainstream BYD brand offerings. On June 29, BYD is rolling out advanced ADAS for highways for its Denza line, with city streets coming later this year. Those services will likely be introduced in its higher-end BYD brand EVs in the coming months.
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 businesses such as smartphone components and assembly. But margins are improving there as well.
In December 2023, BYD Electronics closed its $2.2 billion deal for the mobility business of Jabil (JBL), increasing its exposure to Apple (AAPL).
EU Hikes Tariffs On Chinese EVs
The European Union will impose additional tariffs of up to 38.1% on Chinese BEVs starting in July. That’s on top of the current 10% duties. The European Commission “provisionally concluded that the battery electric vehicles value chain in China benefits from unfair subsidization, which is causing a threat of economic injury to EU BEV producers,” it said.
Specifically, the EU will impose an extra 17.4% tariff on BYD’s BEVs vs. 38.1% for state-owned SAIC. For other automakers, they’ll receive an average duty of 21% if they cooperate and 38.1% if they do not.
The tariffs will affect foreign automakers that export Chinese-made EVs as well, including Tesla. Tesla Shanghai exports the Model 3 to the EU. The EV maker has already said it plans to hike Model 3 prices in Europe as a result.
Meanwhile, not only did BYD get a relatively low tariff hike, but the new duties don’t apply to PHEVs. BYD could emphasize PHEV shipments to Europe going forward. BYD plans to build a factory in Hungary, which would let it sidestep EU tariffs altogether.
The EU and China are in talks, so it’s possible that the tariffs will be modified somewhat.
The Biden administration recently hiked U.S. tariffs on Chinese EVs to 100%.
Separately, Canada reportedly plans to hike tariffs on Chinese EVs as well, which would probably mean Tesla would switch from Shanghai to its U.S. plants for supplying the Model 3 and Y to that market. British Columbia has just altered price caps on EV subsidies that exclude all Tesla vehicles except for the base Model 3, which needed a small price cut to qualify.
Tesla Earnings
Tesla earnings plunged 47% to 45 cents a share in the first quarter, the third straight big EPS decline. Revenue fell 9% to $21.3 billion, the first decline since early in the pandemic. Both missed lowered views.
Tesla burned $2.5 billion in cash during the quarter, even with the company delaying payments.
The EV giant is stepping up spending on Nvidia chips vs. new vehicles.
Gross margins fell to 17.4% vs. 17.6% in Q4 and 19.3% a year earlier.
Analysts, who have been slashing Tesla estimates since the end of 2022, now see 2024 EPS sliding 23% to $2.40 a share after skidding 23% to $3.12 in 2023.
BYD Earnings
BYD earnings had been booming, but have slowed amid heavier discounts.
Q1 net income grew 10% vs. a year earlier in local currency, while revenue rose 4%. Both were slightly below views.
Despite big price cuts and discounts, BYD offset that due to lower battery costs and other savings. R&D costs swelled 70% vs. a year earlier.
Gross margins rose to a record 21.9% from 21.2% in Q4 and 17.9% a year earlier. BYD Auto margins hit 28.1%.
With sales ramping up, gross margins are likely to rise in the coming quarters.
Tesla Stock Technicals
Tesla stock is down 20.4% so far in 2024 as of June 28, according to MarketSmith analysis. Shares rebounded from a 52-week low in April following earnings on investor optimism about “affordable” EVs, FSD and more.
Even though Tesla stock is down sharply in 2024, it’s more expensive relative to earnings.
Tesla shareholders voted decisively to vote for a massive 2018 Elon Musk pay deal as well as reincorporate the company in Texas from Delaware. Musk had hinted that he might shift AI, robotics and other long-term bets to other ventures, such as his xAI startup, if he doesn’t get that 2018 pay deal reapproved, and more.
Delaware courts, which struck down the pay deal earlier this year, could still block it.
On June 26, the EV giant broke out of a consolidation with a 191.08 handle buy point. The base formed above the 50-day line but below the declining 200-day. Tesla stock hit resistance at the 40-week line on June 28.
BYD Stock Technicals
BYD stock is up 6.6% in 2024 through June 28, a rare EV stock in positive territory.
Shares are slightly below a 29.72 buy point from a consolidation that was a few days from being a flat base. Investors could view that short consolidation as a handle to a base going back to last October.
BYD, listed in Hong Kong and Shenzhen, trades over the counter in the U.S. Its U.S. shares often have mini-gaps as well as opening trade mini-spikes or tumbles before settling down.
Tesla Vs. BYD Market Cap
Tesla stock has a market cap of $631.1 billion as of June 28, well off its peak of about $1.2 trillion. That’s still far above BYD’s $80.5 billion.
Tesla Stock Vs. BYD Stock
BYD sells far more EVs than Tesla, and will likely reclaim the BEV crown in Q2. 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 far below $25,000.
The Tesla Cybertruck is a new vehicle, but shipments are still low and problems high. Musk has said the vehicle will be a financial drain in 2024. It’s unclear if yet-unseen upcoming “affordable” variants of aging vehicles will have a meaningful impact. Tesla’s position in China looks especially precarious.
BYD has entered most of the world outside of the U.S. Its model lineup continues to expand dramatically, with big moves upscale and adding tech to its more-affordable offerings.
BYD’s broad lineup and next-generation hybrid system means it’s well-positioned to take advantage of the current shift toward PHEVs.
Tesla stock has been a big loser in 2024, though it’s finding support. BYD stock is in a buy zone.
So keep your eyes on BYD and Tesla, as well as Tesla stock vs. BYD stock.
Please follow Ed Carson on X/Twitter at @IBD_ECarson and Threads at @edcarson1971 for stock market updates and more.
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