BYD and Tesla both reported anemic first-quarter sales this week, serving as a reminder that demand for electric cars appears to be stagnant around the world.
China, the world’s largest electric vehicle market, has not been immune to the slowdown.
The country’s Passenger Car Association expects sales of new energy vehicles to climb 25 percent to 11 million this year, according to figures reported by Bloomberg. This is a healthy increase, but still well below last year’s growth rate of 36%.
Any sign of weakening demand in China is a wake-up call for Tesla, which is already struggling to keep up with aggressive price cuts from its local rivals.
“I think a lot of Tesla’s missed deliveries in the first quarter came from China,” Seth Goldstein, an equity strategist at Morningstar who chairs the research firm’s EV committee, told Business Insider. “There is strong price competition and we are seeing consumers switching to other brands with cheaper deals.”
Tesla waves the white flag
Tesla slashed prices on Models 3, S, 000 dollars.
The cuts helped Telsa post record delivery figures and keep its stock price high – but it still lost its title as the world’s top seller of electric vehicles for 2023 to BYD.
CEO Elon Musk, however, appears to have abandoned the price reduction strategy this year. It’s a sign that he knows Tesla can’t win the price war and remain profitable, Goldstein said.
“Last year was the year of lowering prices, in order to increase volumes, and it worked,” he said. “But Tesla now seems to have made the decision that for now, they are happy with the state of their unit profits.”
Maintaining prices at a stable level in China, however, appears to have had the opposite effect. Tesla completely missed Wall Street’s delivery forecasts – and its market share in the world’s second-largest economy has fallen to around 7%, according to Bloomberg estimates, from 11% at the start of 2023.
Elon Musk at the groundbreaking ceremony for a Tesla factory in Shanghai in 2019. STR via Getty Images
Bad news for BYD
Americans are avoiding electric cars due to concerns about charging and the emergence of cheaper hybrids – but the reasons for China’s slowdown are more complex.
There are many public charging stations – around 2.7 million by the end of 2023, according to the China Electric Vehicle Charging Infrastructure Promotion Alliance. And the mid-range sedan options offered by BYD are among the best-selling cars in China.
However, some potential buyers found constant price cuts from local businesses irritating. BYD slashed the cost of a model by 15,000 yuan ($2,100) in a matter of months last year, reducing its value on the second-hand market and making people even more hesitant to buy one.
China’s economy has also been struggling since the end of the pandemic, with deflationary pressures and a lingering housing market crisis fueling a decline in consumer spending.
BYD makes the bulk of its sales in China – and that figure rose 43% to around 300,000 in the first three months of the year, according to a stock market report released this week. The increase wasn’t enough to stop Tesla from regaining its title as the world’s top electric car maker, despite its own dismal delivery figures for the same period.
Tesla makes the Model 3 and Model Y at its Shanghai factory and recently reduced production from six and a half days a week to five, Bloomberg reported, a sign of falling demand for its cars in China.
If China joins the United States in loving electric vehicles a little less, Tesla and BYD could experience a difficult 2024.
businessinsider
