Could BYD Outpace Tesla If They Sold In North America?

Key takeaways

• BYD is China’s largest manufacturer of electric vehicles (EVs).
• The company is outpacing Tesla in sales, selling 1.62 million cars between January and November 2022 compared to Tesla’s 1.37 for all of 2022.
• BYD is taking a careful approach to entering the U.S. market due to political and economic uncertainty.

Electric vehicles are a growing industry, with the number of EVs purchased in the U.S. increasing to 4.5% of all cars sold. Numbers in other regions, including China, are even higher. In 2021, China saw 3.3 million EVs hit the road, triple the number sold in 2020.

BYD is one of China’s largest EV manufacturers. It has made some investments in the U.S., leading some to wonder whether the company plans to enter the American EV market.

Here’s what EV car buyers and investors should know, and how Q.ai can help you get invested in a future of clean tech.

BYD history

BYD Auto was founded as a subsidiary of BYD Co Ltd in 2003. Five years later, the company unveiled the world’s first production model plug-in hybrid vehicle. Berkshire Hathaway, a major financial company headed by Warren Buffett, made a $232 million investment in BYD’s parent company later that year.

That plug-in hybrid, the BYD F3, was the best-selling sedan in China in 2009 and 2010. Helping to further fuel the company’s success was its export of vehicles to Africa, the Middle East, and South America.

BYD continued to expand and produce new models of cars. It began plans for overseas production facilities in 2015 and became the world’s third-largest plug-in vehicle manufacturer in 2016.

2020 saw the company plan an expansion to Europe, beginning with Norway. An Australian taxi operator also announced plans to add 2,000 BYD vehicles to its fleet.

In June 2022, BYD officially surpassed Tesla as the largest EV manufacturer in the world after selling more than 640,000 cars in the first half of the year. The next month, it announced an expansion of vehicle sales to Japan. It also spent time investigating ways to establish a distribution network in the U.S.

BYD vs. Tesla

Since BYD overtook Tesla as the world’s largest EV manufacturer, it’s natural to want to compare the two manufacturers. However, it can be difficult to draw a direct comparison for a few reasons.

One is that Tesla is almost purely a car maker. While it relies on batteries and other technologies to improve its vehicles, it does not have other business segments that focus on technology unrelated to cars. On the other hand, BYD has an electronics subsidiary that produces more than just cars.

Another direct comparison issue is that the reporting requirements differ for American and Chinese companies. Some investors also do not fully trust the financial reports submitted by companies based in China and emerging markets.

One thing that can be compared is the production capacity of each company. In November of 2022 alone, BYD sold 229,942 electric vehicles. Compare that to Tesla’s sales of 439,701 in Q4 of 2022. Tesla takes roughly three months to less than double what BYD can sell in one month.

By November’s end, BYD had sold 1.62 million cars to Tesla’s total of 1.37 million for the whole year.

What makes BYD so successful?

BYD is outselling Tesla, but before deciding that BYD is the stronger business, you need to consider why that is.

One reason is that BYD is located in China, giving it access to one of the world’s largest markets with a population of over 1.4 billion. While Tesla sells cars across North America, the EU, and parts of Asia (including China), BYD has the advantage of starting in a larger market.

Additionally, while Tesla positioned itself as a premium brand, BYD focused on more economical cars, only recently aiming to compete with luxury offerings. Though BYD sells more vehicles, luxury cars are more profitable, so BYD hopes to begin boosting its profitability in this way.

What the future holds

BYD has made some investments in the U.S. market. However, it is taking a cautious approach regarding further investment and expansion into the country.

One reason for this is the rising tension between the United States and China. With those tensions high, there is a risk that car buyers won’t be interested in buying a vehicle designed and manufactured in China.

There is also the chance that government intervention may impact BYD’s success in the American market. For example, the Inflation Reduction Act added rules on where electric vehicle companies can source battery materials from and barred EVs built outside of the United States from being eligible for the $7,500 tax credit offered to people who buy EVs.

Overcoming an effective $7,500 markup on its cars would be difficult for BYD to do. However, the company continues to manufacture electric buses from a factory built in Lancaster, California, giving it some presence in the U.S. market.

What it means for investors

BYD has yet to announce a major expansion into the United States. Recent pushes to encourage U.S.-based production of batteries and other materials essential to EVs make it less likely that the company will attempt to aggressively enter the market.

Still, BYD is outpacing Tesla in the competition to become the world’s largest producer of electric vehicles and has begun making inroads in many other countries. Investors who want to diversify their portfolio of green transportation companies may consider investing in BYD.

If you’re looking for help building your portfolio, consider working with Q.ai. Its artificial intelligence can design a portfolio for any goal or economic situation. With Investment Kits, investing can be easy and fun. Our Clean Tech Kit, for example, can help you get invested in innovative tech like EVs.

The bottom line

BYD is set to be a major player in the world of electric vehicles, but it remains to be seen if and when the company will try to stake a claim on a portion of the U.S. market. Investors will be watching BYD closely to see if they can predict when it will try to expand even further.

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