The chicken rice war has begun, Tesla vs BYD

upupahcai
2023-01-07

Tesla just slashed the selling price of their cars sold in China in a move to stir up demand at the expense of some margin. Tesla bringing the price down of their model 3 to 229,900 yuan is a direct challenge to BYD most expensive and profitable model which is the seal model pricing now at 225,000 yuan

China demand issues

Tesla has always priced their cars in the luxury segment range because of their high demand giving them a high margin on each vehicle sales 

However the latest figure showing tesla delivered 55,796 vehicles in December is a 44% decline in deliveries month over month clearing showing demand has fallen significantly which likely to have prompted Tesla cutting the selling price yesterday to spur up demand 

Direct challenge to BYD

Before Tesla reduced the price of their cars in China, Tesla and BYD are not really direct competitors with Tesla dominating the above 250,000 yuan space and BYD below. 

This all changed with Tesla moving towards left of the space with the price cut of their vehicles, officially brining themselves as a direct competition to BYD in that space. 

Reduce margin, increase addressable market

We have to understand margin has always been high for Tesla with their excellency at ramping production, reducing their price is effectively passing production cost saving directly to customer. 

As long as their giga factory is producing at full capacity and sales is able to meet demand, I would not be too worried and rather welcome the latest move by Telsa

In addition, this move expands the total addressable market of China having already dominated the luxury EV sector 

Thoughts

BYD has always priced their EVs at low prices and operate at razor thin margin, starting a price war hurts BYD more than Tesla in the long term especially worse if government subsidies ends for BYD eventually. 

Zooming out to a broader picture there is still room for both BYD and Telsa to grow with more and more take up of passenger EV at the expense of ICE vehicles, this is despite China already having the largest global passenger EV sales 

We have to see how this move by Tesla pans out.

$Tesla Motors(TSLA)$ $Vanguard S&P 500 ETF(VOO)$ $BYD Co., Ltd.(BYDDF)$  

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Modified in.2023-01-07
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Comments

  • LeilaLynch
    2023-01-07
    LeilaLynch
    Even with tsla's price cuts, all of China's EV producers makes EV's that are high quality and sells at 20 to 50% cheaper than tsla. The China price cuts by tsla is a desperate attempt to save a failing business in China.
    • upupahcai: 
      I wouldn't say it's a desperate attempt, EV makers with low margin should be worried instead if the price war goes ugly in a recessionary environment
  • BaronLyly
    2023-01-07
    BaronLyly
    BYDDF has so much upside....they do in house chips, parts, batteries. Buffett has been with this Company for years. They have their own infrastructure
  • ChristKitto
    2023-01-07
    ChristKitto
    Since BYD increased prices after Tesla deep cut their prices, Also, BYD start releasing high-end models. The gap of profit margin between BYD and Tesla is disappearing.
  • breAkdaWn
    2023-01-07
    breAkdaWn
    if people want cheap car. best buy is wuling cars, can even charge at home sockets! and then is A Tesla!!!
  • GOKUst
    2023-01-07
    GOKUst
    K
  • wijaya
    2023-01-07
    wijaya
    ok
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