Unlock the Editor’s Digest for Free

The EV Market: A Shift from Sales Numbers to Price and Margins

When Tesla and BYD release their quarterly sales numbers, investors tend to focus on which company has delivered the most electric vehicles to customers. But is this the best way to evaluate the companies’ performance?

The Fluctuating Sales Numbers

In the latest quarter, Tesla retained the top spot, delivering 443,956 vehicles, while BYD delivered 426,039 battery-powered EVs. However, this metric is no longer as important as it used to be.

The Problem with Sales Volume

Comparing Tesla and BYD solely based on sales volume doesn’t take into account other crucial factors, such as unit price and margins. The two companies are competing at different price ranges, with Tesla’s cheapest model starting at around $31,900 in China, triple the price of BYD’s lowest-priced model, the Seagull.

Price Matters

Tesla’s higher prices help it achieve higher operating margins of over 9%, compared to BYD’s 5%. In 2023, Tesla generated $82.4 billion in automotive revenues, while BYD reported $66.5 billion.

BYD’s Price Cuts Boost Sales

BYD’s record-breaking deliveries in the second quarter were driven by its price cuts in late March. Even Tesla’s sales show that deliveries of its two cheapest models, the Model 3 and Model Y, were 7% higher than market expectations, while deliveries of its higher-priced models missed expectations by nearly 30%.

The Importance of Price Range

Offering EVs at multiple price points is crucial for future growth, especially in emerging markets like Thailand, where EV sales grew seven-fold last year. BYD’s price advantage, thanks to its vertically integrated supply chain, has been further boosted by the decline in battery cell costs.

Surging BYD Exports

BYD’s exports, which quadrupled last year, will add to the case for Tesla to expand its portfolio to the lower price bracket.

The Growing Urgency for Tesla

In China, Tesla sales have been weak, with sales of its China-made EVs falling 24% in June from a year earlier. An ageing model line-up and Tesla’s edge in software is being challenged by Chinese rivals like Nio, which produces EVs equipped with self-driving software and intelligent driving technology.

Conclusion

The sales numbers of Tesla and BYD no longer tell the whole story. As the richest EV markets become increasingly saturated, a wider price range for Tesla’s models would help it better justify its premium valuation.

FAQs

Q: Why is sales volume no longer the best metric to evaluate Tesla and BYD’s performance?
A: Because it doesn’t take into account other important factors, such as unit price and margins.

Q: Why is price important in the EV market?
A: Price matters because it affects operating margins and revenue.

Q: How does BYD’s vertically integrated supply chain benefit the company?
A: It allows BYD to cut costs and offer its EVs at a lower price, making them more competitive.

Q: What is driving BYD’s growth in exports?
A: The decline in battery cell costs and its price advantage.

Q: Why is Tesla’s model line-up aging?
A: Because it hasn’t been updated recently, making it less competitive against Chinese rivals like Nio.

Q: What is Nio’s advantage in the EV market?
A: Its production of EVs equipped with self-driving software and intelligent driving technology.

Q: What is the takeaway from Tesla’s latest sales figures?
A: That the company needs to expand its portfolio to the lower price bracket to remain competitive in the EV market.

Author: www.ft.com

Orginal Source link