BYD has double Tesla’s share of the Chinese market for battery-electric vehicles.
Kiyoshi Ota/Bloomberg
Charlie Munger, Warren Buffett‘s friend and longtime partner, flagged a critical weakness for
Tesla
on Wednesday, saying the EV maker is lagging behind in the world’s biggest market for cars.
“
BYD
is so much ahead of
Tesla
in China…it’s almost ridiculous,” Munger told CNBC’s Becky Quick.
It’s a good point, but Tesla bulls don’t have much to worry about so long as management heeds Munger’s warning.
It sounds counterintuitive that BYD could be eating Tesla’s lunch in China. Tesla (ticker: TSLA) is the world’s most valuable car company and the largest maker of all-electric cars. It earned an operating profit margin of almost 17% in 2022, the best among large auto makers, while the comparable figure for BYD (1211. Hong Kong) is just above 5%.
But BYD is no slouch. It’s the second most valuable car company on the planet, depending on the day, though
Porsche
(P911. Germany) is very close. Those three are the only auto makers worth more than $100 billion, and
Porsche,
of course, isn’t a mass market auto maker.
BYD has an edge in sales growth. Sales grew at roughly 80% in 2022, while Tesla’s increased about 50% Tesla is about 30% bigger than BYD, so it is a little harder for it to grow from that larger base.
BYD also delivers more battery-electric vehicles in China than Tesla does. BYD sold 911,140 all battery-electric vehicles in 2022. Tesla sold about 439,000 vehicles in China.
BYD also sells plug-in hybrids. Total electrified passenger vehicle sales for BYD in 2022 came in at 1,857,379 units. Tesla delivered about 1.31 million cars.
There isn’t much mystery why BYD is larger than Tesla in China. Its cars are cheaper. The average price for a BYD passenger vehicle is about $30,000. The average price for a Tesla in 2022 was about $55,000.
“BYD is playing in all price segments in China and therefore has gained a lot of market share,” says
Future Fund Active ETF
(FFND) co-founder Gary Black. “Tesla will introduce a $25,000 to $30,000 EV by 2024.”
Tesla needs to emulate BYD, a little, by producing a lower-priced car. That would open up far more of the auto market to the EV pioneer.
Black owns stock in both companies. EV bulls may want to consider doing the same.
Tesla stock was down 0.6% in Thursday trading, while the
S&P 500
and
Nasdaq Composite
were both down 1.1%, a sign that the Munger interview isn’t hurting the shares.
So far this year, Tesla shares are up about 73%. U.S. listed American depositary receipts of BYD, which trade under the symbol BYDDY, have risen about 21%.
Write to Al Root at allen.root@dowjones.com
Credit: marketwatch.com