According to statistics from Late Finance BYD make an average net profit of 9,000 yuan per car, that’s about 1,250 USD. Tesla on the other hand made over 8,250 USD per car based on net profit of 14.9 billion dollars and sales of 1.81 million cars in 2023. What this clearly shows is that BYD is going after market share rather than profits.
Such tactics are typical among Chinese businesses where a race to the bottom, winner takes all mentality pervades. Good examples have been bicycle sharing schemes, food delivery and to a lesser extent ride hailing schemes. All initially had multiple entrants who then undertook huge discounting and promotions in order to gain market share. With bicycle sharing this largely whittled the competition down to two companies Ofo and Mobike. The result though was that due to relentless competition they had created a business model that was not profitable and neither company exists anymore, although there are still a handful of bicycle sharing companies.
We are seeing a similar story in the Chinese car market where since last year there has been huge discounting from brands. China for a long time has had too many producers and too many brands, and the average factory utilization rate is 59% according to JustAuto. A healthy range is generally considered to be 70-80%.
With NEVs it is rapidly becoming BYD and then everyone else. BYD last year sold 2,706,075 cars in China, the next highest was Tesla at 603,664. By the time you get down to tenth place sales are only 144,155 from Leapmotor. BYD is setting the agenda thanks to its ability to sell large numbers of cars at low prices.
Despite the low profit level in 2023 BYD has actually increased its profit levels over previous years. Since the end of 2019 BYD’s cash reserves have increased by eight times. Before 2021 the net profit per car was actually negative. Although last year’s profit per car was relatively low it was still significantly higher than the 5,600 yuan (750 USD) per car in 2022.
Fast Technology asks the question as to whether car companies want market share or single car profits? BYD has the luxury thanks to economies of scale and its vertical integration to lead when it comes to pricing. For many other companies particularly in the NEV market, but also in the market in general, the single car profit that Fast Technology talks about might literally be one car due to the low sales.
From the beginning of this year BYD has fired a new salvo in the price war and has switched from an NEV the same price as ICE model to NEV cheaper than ICE tactic. Sales for March were the second highest monthly figures achieved by BYD, the highest record being in December 2023, and saw sales once again break the 300,000 level for a month.
Source: Fast Technology
Sure, with at least $10000 to $15000 of illegal subsidies per car by the chinese government … sure than you can make this fake-profit!!!
As if all other car makers around the world who are building cars since decade suddenly have become too stupid to build cars….
Ridiculous and arrogant!
Yeah Peter, you are right… but let’s see what the brain washed clowns will answer too this 🙂
Already laughing in advance about their non-sense answers….
Let’s buy Chinese car to bankrupt the Chinese government.
The narrative of profits only through high Chinese subsidies is frequently repeated but quantifiably false. The US Auto Alliance claims BYD is getting unfair subsidies, but if you take the number they use, convert to USD and divide by cars sold, it works out to less than $200 per vehicle. For comparison, if BYD were to recieve the US $45/kWh Battery Production Tax Credit alone, it would amount to multiple times that amount.
Or compare Automotive Gross Margin to Net Margin of BYD and Tesla. When comparing cost to make a car versus what they sell it for as a percentage (Gross Margin), BYD is significantly ahead. But BYD doesn’t get over $1.8 Billion in regulatory credit sales. And BYD pays corporate income taxes, whereas Tesla has never paid US income taxes due to tax subsidies. Tesla actually pulled forward $5 Billion in tax credits to post their most recent results, 1/3 of their net revenue. In terms of operating expenses, BYD does spend ~$1.5 B more on R&D but they pay less in selling expenses that are shifted onto the dealers. Tesla and BYD get the same national subsidies in China, but Tesla actually gets more in local subsidies for their plant in the form of tax abatements from the more generous Shanghai prefecture. Once you add it all up, the largest factor in Tesla making significantly more net margin, despite falling behind in gross, and why they made 50% more net income than EBITA last year, comes down to US subsidies that are multiple times the amount per vehicle compared to China.
Larry you are right, I’m so happy to see such a clever person. You rationally compare the BYD with TESLA instead of believing in the words of some media blindly!.
did someone forget to take their insane pills today
Shouldn’t China be bankrupted by now if they hand out $10000+ per car for BYD alone? See in March, BYD sold 302K +, that is $3.02+ billions. Do you have a brain?
You should encourage everyone to buy the Chinese car so that you can bankrupt the Chinese government.
Interesting information.
Well this is Marketing. China obviously have too many brands, no doubt about that. The strongest will survive – it’s as in the nature. All car manufacturers worldwide has some sort of subsidies from their governments.
And BYD and Tesla still got some profit – which no one else has got. This is the crazy situation. The problem for the classic, old brands – especially in Japan, Europe and USA – is the fact that they don’t understand that they need new factories, devoted to EV production.
To continue to put batteries in old combustion cars will never give any profit. With regards to China, there are simply too many – they will “eat” each other in the end. And it’s actually not an unhealthy situation.
With regard to BYD, they got themself covered. But their marketing strategy for the international market is not good. Export lack progress and success. Instead of widen their product lines, and develop many new bands – they need a ‘name’ – recognisable ‘brand’. To build a name (read ‘brand’) take decades.
SAIC has been more successful with export – especially in Europe due to their purchase of the name ‘MG’. Look how many years – even decades, it took Toyota and the other Japanese and Korean brands to build their overseas markets.
Never mind MG was a lousy car, went bankrupt – people still remember the name, and mostly believe it’s a European car. The “shortcut” to much more export for BYD is to do the same. And then – after a more solid foothold in the market – it would be easier to build further, parallel on their own brand names.
BYD has been very successful in Southeast Asia, Middle East and Latin America. For example, in Brazil BYD’s deliveries in March 2024 was more than 6200 units, and BYD was the 10th best selling brand after merely one year in the country. With the launch of Seagull (rebadged as Dolphine Mini), BYD is singlehandedly spearheading EV adoptions in Latin America. For another example, BYD is selling almost the same number of EVs in Isreal alone as in the entire Europe.
The world is much bigger than Europe + N. America, which most people in the West often fail to comprehend.
Last year, BYD cut prices and saw both their gross and net margins increase. They are outspending competitors in R&D (more than their net income) and using those engineers not only to come up with new innovations but also to take the cost out of products. Margins might take a hit this year in the quest for growth, but likely not as much as some people anticipate. And BYD will maintain at least some level of profitability, if only to avoid dumping accusations.
Yep, good point on the R&D spend – miles above their peers
That Tesla net profit will be far lower in 2024, as falling prices & financial incentives have not reached rock bottom yet, for a full 12 months
1/3 ($5B) of Tesla’s net profit was tax benefits that they pulled forward and claimed in 2023 as a one time adjustment. In other words, 1/3 of their net profit was not from 2023 business. Unless the subsidy stack in the US tax code is much more than many estimate, they can’t keep doing that maneuver.
Tesla’s automotive gross margin (what they make from selling cars before operating expenses, taxes, etc.) is already significantly less than other automakers, like BYD or Toyota, and is roughly in line with Ford at ~15%. I would not expect Tesla’s gross profit to improve this year.
Would be great if BYD sold directly in Australia and other countries to further reduce prices and increase market penetration. That will bring more competitive prices and force competitors to lower theirs. Please bring BYD Seagull as well.
This article casually didn’t mention which car unit did BYD made over US1250 from. Which car? What car? And what variance?
At least to some extend, all national car brand receive some form of subsidiaries from their government in order to stay in competition or imposes traffic on importing car from oversea, like how the US did to China made vehicle.
Did China did the same to Tesla? China embrace the competition they have over at China and even given tesla their own fare share of local subsidies.