Tesla-BYD rivalry is mostly manufactured, for now

Charging ahead. The best thing about two companies vying to be the biggest electric-vehicle maker is that there is any competition at all. For years Tesla was by far the dominant manufacturer of zero-emissions cars, despite all the claims from Ford Motor to General Motors and Volkswagen that they would soon be worthy competitors. These legacy players are still largely struggling. But another upstart has sped ahead, with China’s BYD on Tuesday unveiling sales that allowed it to overtake Elon Musk’s outfit for the final three months of 2023. From an industry perspective though, who’s on top is, is largely irrelevant for now.

BYD, after all, is benefitting from a home advantage, with China now the world’s largest market for new cars and boasting higher levels of EV penetration too. Granted, Tesla’s Shanghai factory is its biggest, able to produce around one million vehicles a year. But the country is also the American company’s main export hub, whereas its rival makes and sells around 90% of its vehicles in the People’s Republic.

What’s more, making battery-powered cars remains a growing industry. So while BYD surpassed by some 30,000 the 485,000 mostly Model X and Y vehicles Tesla sold in October, November and December, both companies enjoyed a record quarter. That may well continue. Even allowing for recent wobbles, worldwide EV sales are rising faster than those powered by gasoline yet account for only slightly more than a tenth of new car deliveries. Both companies are still expanding manufacturing capacity, too – Tesla in Germany and Mexico, while BYD is setting up in Hungary, Brazil and Thailand.

Tesla, at present, has more geopolitical tailwind on its side. Its vehicles are sometimes barred from entering sensitive areas in China, but Musk has cultivated a good relationship with Beijing despite growing U.S.-China tensions. BYD and other Chinese automakers, meanwhile, are unlikely to make big inroads into the United States and could be hampered from exporting cars to Europe if the region’s authorities impose tariffs. The Chinese brand is also unlikely to get far in India, another big potential growth market that Tesla is eyeing, given border tensions between the two countries.

Of course, there’s always a risk that Tesla’s status in the People’s Republic wanes, which could impact its supply chain. Absent that, the long-term risk centres on technology: there’s a growing perception that China’s electric-vehicle industry, from BYD to battery maker CATL, is winning on that front. Carmaker Nio is touting a battery with a 1000-kilometre range, while suppliers are developing sodium-ion ones. Tesla, meanwhile, is having problems with the new dry-coating process it’s using for its Cybertruck battery. That’s a much more important race to win.