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The Rise of BYD: Insights into the EV Market Shift
A recent discussion initiated by our article “BYD Shocks — Is Winning the EV Revolution” unveiled some noteworthy viewpoints thanks to reader Larry Evans. In light of past evaluations, it’s been argued that BYD has maintained a relatively slender gross margin while Tesla’s figures appear substantially higher. However, this narrative has transformed significantly from 2019 through 2023. The landscape is now much broader than just examining gross margins; as Larry elaborates:
Current Gross Margins in Perspective
“For the most recent quarter reported, BYD’s automotive gross margin stands at an impressive 25.6%. In comparison, Tesla’s automotive gross margin—excluding income from regulatory credits—is assessed at only 13.58% during the same period.”
Vertical Integration and Early Profitability
“BYD originally began as a battery and electronics manufacturer before transitioning into vehicle production. This foundational experience in supply manufacturing grants them advanced vertical integration which sets them apart; they did not merely mimic Tesla.”
“Starting humbly, BYD quickly became profitable and prioritized reinvesting its earnings primarily into research and development to foster expansion. Conversely, Tesla relied heavily on capital investment to sustain an unprofitable business model for most of its operational history, opting to hoard cash reserves after finally achieving profitability instead of utilizing it for growth purposes.”
The Scale of Electric Vehicle Adoption Globally
“It’s crucial to note that nearly two-thirds of the worldwide electric vehicle market is concentrated in China—with China and other regions accounting for approximately three-fourths combined. As the top player within China’s vast market, BYD has expanded its footprint globally as well; they are currently recognized as the leading EV brand not just in Singapore but also across nations like the Philippines, Colombia, Israel, Thailand, and Brazil.”
“Interestingly enough, data reveals that BYD surpassed Tesla’s sales in January within the UK market—a sign indicating rapid progress against competitors does not necessarily span decades where competitive conditions favor participation.”
Well articulated insights by Larry! Truly thought-provoking.
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