This year's Q2, BYD's sales in China increased by nearly 100% YoY, surpassing Tesla's 70% growth. At the same time, BYD is also accelerating its expansion overseas. The competition between the two for a higher market share may have just begun.
In the second quarter of this year, both BYD and Tesla have achieved record-breaking sales, indicating that the "rivalry" between BYD and Tesla may be entering a new stage.
On the evening of July 2nd, BYD released its sales report, announcing that sales in June reached a new high, with 253,000 units of new energy vehicles sold, an 88.79% year-on-year increase. This is also the first time BYD's monthly sales have exceeded 250,000 units. Cumulative sales in the second quarter exceeded 700,000 units, nearly doubling the 354,000 units sold in the same period last year, achieving a nearly 100% year-on-year growth and setting a new quarterly sales record.
In the full year of 2022, BYD's sales of new energy vehicles reached 1.8635 million units, and sales in the first half of this year have already reached 1.2556 million units. Based on this calculation, BYD has achieved two-thirds of last year's annual sales in just half a year. 
In June, BYD sold a total of 10,500 new energy passenger vehicles overseas, a slight increase from the 10,200 units sold in May. In cumulative terms, BYD's overseas sales in the second quarter reached 35,500 units, with a total of 74,300 units sold in the first half of the year. Last year's total overseas sales were 53,600 units.
At the same time, Tesla also announced its record-breaking production and sales in the second quarter of this year: it delivered over 466,100 vehicles to customers worldwide, an 83% year-on-year increase; and produced 479,700 vehicles in the second quarter, an 85.5% year-on-year increase.
According to analysis by Barron's, Tesla did not report sales by region. It is estimated that out of the 466,100 vehicles delivered in the second quarter, approximately 155,000 were sold in China, representing a growth of over 70% compared to the same period last year.
BYD's sales growth rate in China in the second quarter was close to 100%, surpassing Tesla's 70%. Therefore, the analysis suggests that Tesla is the global leader, while BYD is the leader in China.
There are many reasons why Tesla's growth in China lags behind BYD, with the most important one being price. Tesla's prices are generally higher than BYD's.
Just one day before both companies released their sales reports, Tesla once again announced price reductions in China. On July 1st, Tesla announced that customers who purchase the new Model S/X models in stock can enjoy discounts ranging from 35,000 to 45,000 yuan. BYD's "battle" with Tesla may have just begun.
BYD's Overseas Exploration
Since last year, BYD has accelerated its pace of going global. Looking back at the first half of 2023, BYD's monthly sales of new energy passenger vehicles overseas have been around 10,000 units.
BYD has recently made continuous inroads into the heartland of Europe. On June 13th, BYD held a brand and product launch event in Italy, announcing its entry into the Italian passenger car market. The BYD ATTO 3, Han, Dolphin, and Seal models were unveiled. On June 14th, BYD announced the launch of 5 electric vehicles in the French market.
In the past few weeks, J.P. Morgan's global automotive team conducted a comprehensive survey of BYD's major overseas stores and believes that BYD's domestic new energy vehicle business and overseas expansion will bring potential upside. They still have a positive outlook on BYD.
For BYD, J.P. Morgan believes that the focus should be on the following three aspects, as mentioned in this article. First, the development of plug-in hybrid vehicles, where there is no significant competition from foreign brands in this field, only partial competition from Chinese counterparts. It is expected that BYD's market share of plug-in hybrid vehicles this year will reach 69%, higher than 64% in 2022.
Second, it is expected that BYD's profit margin will improve in the second half of 2023, benefiting from the improvement in product structure and the increase in sales contribution from high-profit-margin models such as Tang and Yuanwang. BYD's overall gross margin is expected to increase from 17% in 2022 to around 20% this year.
Third, exports are another driving force for long-term growth and may also serve as a downside protection for profitability due to intense competition in the domestic market.
The institution believes that BYD should initially experience faster and stronger growth in the Southeast Asian market. This is because the region lacks global competitors with moderately priced products and attractive technological content (such as ADAS) in the field of new energy vehicles. After Southeast Asia, Europe is another growth area, especially in the low-priced product segment. The main challenge BYD faces in Japan is to increase brand awareness.
Based on this, J.P. Morgan has raised its sales forecast for BYD in 2023 from the previous 2.6 million units to 2.8 million units. They believe that about 10% of the European market will be occupied by Tesla, BYD, and other Asian automakers. At the recent BYD 2022 Shareholders' Meeting, Wang Chuanfu also stated that the new energy vehicle industry will undergo a major transformation in the next 3-5 years. Currently, the pace of transformation is accelerating and is expected to further accelerate in the future, often exceeding expectations. "BYD is confident in gaining a higher market share in the next 3-5 years."
Tesla's price reduction boosts sales
Tesla's price reduction undoubtedly puts pressure on BYD and may trigger a new round of intense competition in the domestic new energy vehicle industry.
On June 8th, BYD held its 2022 Annual Shareholders' Meeting, and Wang Chuanfu frankly stated that the domestic new energy vehicle industry will enter an elimination round in 2023, as it is in a phase of oversupply.
Tesla CEO Elon Musk stated during the Q1 2023 earnings call that, compared to low production and high profit margins, increasing sales and expanding scale is the right choice at this time:
"It is better to sell more cars at a lower profit margin before we perfect autonomous driving technology and reap the profits in the future."
Since the beginning of this year, Tesla has conducted multiple rounds of price adjustments worldwide. Although the decline in profits is still a concern, its Q2 deliveries far exceeded expectations, reflecting that the price reduction continues to boost Tesla's sales in the global market. Tesla also received another support from the federal government in the second quarter, with some models eligible for a $7,500 federal tax credit.
Tesla has just confirmed that the company will release its Q2 earnings report after the US market closes on July 19th (early morning of July 20th Beijing time) and hold an earnings conference call later that day.
As of now, Tesla's stock price is $261.77, a 142% increase year-to-date.
