Both electric carmakers have emerged as breakout threats to legacy automakers
Bloomberg News
BYD Co. Ltd. notched up another win over Tesla Inc. on Wednesday, reporting quarterly revenue that beat Elon Musk’s carmaker for the first time since the pair have gone head-to-head in global electric vehicles sales.
Revenue for China’s best-selling automaker soared 24 per cent year-on-year to 201.1 billion yuan (US$28.2 billion) for the three months ending Sept. 30, falling short of estimates, but exceeding Tesla whose sales hit US$25.2 billion in the same period.
Net income increased 11.5 per cent to an all-time high of 11.6 billion yuan, surpassing consensus, after BYD sold an unprecedented 1.12 million electric and plug-in hybrid vehicles last quarter. It generated a gross margin of 21.9 per cent. Its profit, however, is still overshadowed by the US$2.2 billion Tesla earned.
In the first nine months, BYD had net income of 25.2 billion yuan on revenue of 502.3 billion yuan.
BYD and Tesla have emerged as breakout threats to legacy automakers, particularly as Volkswagen AG, Ford Motor Co., Stellantis NV, and General Motors Co. struggle along the path to profitability with their EV transitions. As consumer demand for electric cars wanes, BYD has been insulated more than Tesla, considering its strong lineup of hybrid vehicles.
Hybrid vehicles are a major contributor to the revenue surge at Shenzhen-based BYD, with some models’ upgraded powertrains allowing for a more than 2,000 kilometres range. Another key part of BYD’s edge is its vertically integrated supply chain, and making more parts in-house gives it a cost and scale advantage to produce cars cheaper.
Tesla, meanwhile, is dealing with an increasingly limited and stale EV-only lineup and has been more focused on ramping up production of its Cybertruck and expanding the use of its partial-automation system marketed as Full Self-Driving.
Still, Tesla’s AI potential and its longer lead in EV sales has helped cement its place as the world’s most valuable automaker. BYD comes in third, behind Toyota Motor Co. but ahead of VW, Mercedes, and Detroit’s three car making giants.
BYD has also benefited from resurgent domestic demand in China that’s been spurred by an improved package of national and local government subsidies aimed at tempting consumers to trade in gas cars for EVs and hybrids. Those local sales have helped cushion BYD against overseas resistance.
The European Union this week imposed higher tariffs peaking at 45 per cent on electric vehicles from China, ratcheting up trade tensions between the world’s leading export powers. BYD also doesn’t sell passenger cars in the United States because of tariffs.
Earnings prospects for BYD in the final quarter look even stronger as it benefits from that leading sales position in China, the world’s biggest car market. The last three months of any year are usually considered peak purchasing season. And on top of subsidies, central government agencies are being ordered to boost EV purchases.
BYD is also on track to meet its revised annual sales target of 4 million vehicles, based on its current run rate. It has sold about 2.74 million vehicles through September. Citibank Inc. estimates BYD could sell as many as 500,000 units per month by November.
BYD’s Hong Kong-listed shares closed down 0.7 per cent on Wednesday, trimming year-to-date gains to 37.6 per cent. Tesla’s stock is up 4.4 per cent since January.
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