Can Tesla beat BYD?

Hey, everyone. Want to kick things off today by saying thank you. Without your support of this newsletter, your perspectives on the auto industry, and your willingness to share inside scoops with yours truly…none of this would exist. Thanks for playing a part in the CDG journey.

—CDG

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BYD vs. Tesla: Who Wins?

For a long time, the competitive field for the electric vehicle market in the US has looked like Tesla…then everyone else. After all, Tesla captured a massive 55% of the entire EV market in 2023 (and even that was down from 65% in 2022).

As domestic manufacturers do their best—and spend billions of dollars—to compete with Tesla, there’s another threat that’s not homegrown: BYD, the high-growth, Warren Buffett-backed Chinese EV maker that overtook Tesla as the world’s largest seller of EVs on a quarterly basis at the end of last year, even if only for a quarter.

So as we continue marching toward what most know will be an electrified future in the US and beyond…who is going to be the OEM to beat—Tesla, or its international competitor? Let’s unpack each manufacturer’s superpower.

BYD is relentlessly going after market share. Armed with abundant (and stable) resources, industry-leading battery tech, and access to relatively inexpensive labor, BYD can leverage its unique industrial advantages to keep production on the cheaper side. That’s part of why it can sell models for as little as $11,000. (!)

But a key detail: New stats from Late Finance suggest that BYD makes an average net profit of 9,000 yuan, or $1,250, per car. Tesla, on the other hand, made about $8,250 per car last year.

What that means: 

• BYD isn’t prioritizing profitability, even if it does have the production advantage over competitors. It’s prioritizing reach by offering lower prices that are accessible to a wider swath of customers.

• And it’s working. Last year, BYD sold 2,706,075 cars in China, nearly 4.5x its nearest competitor…Tesla, which sold 603,664 models in China (its second biggest market after the US).

To put BYD’s growth in perspective: BYD sales have grown by about 1 million cars annually in the last two years. The last automaker to do that in even one year in America was General Motors…in 1946, after GM suspended passenger car sales during World War II.

The rise of BYD, which started in 1995 as a battery manufacturer, illustrates China’s rapidly growing presence in the global market for new-energy vehicles. Already, BYD is building assembly lines in Brazil, Hungary, Thailand, and Uzbekistan and prepping to do the same in Indonesia and Mexico. It’s also expanding in Europe—BYD said overseas sales of new-energy vehicles nearly tripled to 38,434 units last month.

The question on everyone’s mind, then: Is BYD coming to the US?

“We’re not planning on coming to the US,” BYD Americas CEO Stella Li told Yahoo Finance last month. “It’s an interesting market, but it’s very complicated if you’re talking about EVs.”

Here’s why it could be “complicated” for BYD to enter the US market, even after the massive success of other Asia-based manufacturers like Toyota and Mazda →

• Regulation. This one’s two-fold. 1) Trump-era tariffs are still in place that prohibit most Chinese automakers from selling cars in the US (although BYD does sell buses here). And 2) the Inflation Reduction Act of 2022 offers tax credits worth up to $7,500 for EV makers…excluding any “Foreign Entity of Concern.” In November, the Energy and Treasury Departments confirmed that companies from China are considered foreign entities, so no subsidies for BYD and other Chinese EV makers.

• Consumer demand. While they are growing, EV sales only increased 1.3% in Q4. Strategically, BYD tends to prefer higher-growth markets. EVs represent at least 30% of China’s entire auto market, compared to about 7% in the US.

Still, BYD remains a threat to many domestic carmakers. “Frankly, I think if there are no trade barriers established, they will pretty much demolish most other companies in the world,” Tesla CEO Elon Musk said of Chinese EV makers earlier this year.

So what is Tesla doing to compete? Tesla is tirelessly pursuing innovation. It’s as simple as that.

Innovation has been the core driver of Tesla’s success in the US, and Musk is the kind of leader who thrives when backed into a corner (read: when faced with a thoroughly scaled, inexpensively manufactured competitor). Innovation is how Tesla has always tried to win, from the Cybertruck to the advent of gigacasting.

This week, Tesla laid off more than 10% of its global workforce, a strategy Musk told employees will “enable [Tesla] to be lean, innovative and hungry for the next growth phase cycle.” And while layoffs suck no matter what, this could be a clue that Tesla is preparing for a major push toward innovation as it readies for the competition that lies ahead.

Who can come for Toyota’s crown? Maybe it’s Hyundai, with some significant momentum at its back. I spoke with Andrew DiFeo, Managing Partner at Hyundai of St. Augustine, about the fight to unseat Toyota, plus why he left $8 million on the table during Covid, how he built a Florida dealership for $17 million, and how he's selling cars on Amazon. Check it out here.

Can dealers make money without consumers paying more in prices? It’s a tough question to answer, but Jim Roche, CEO of Warrcloud, did it seamlessly. We also covered some other major trends: the best service center in America, the dealership profit pendulum’s latest swing, and much more. Don’t miss it.

Listen to the episodes here, and subscribe to the CDG Podcast on Apple, Spotify, or wherever else you get your podcasts. And thank you to Auto Hauler Exchange, CDK Global, Private Auto, and Warrcloud for making these episodes possible.

Are you still relying on auctions? We want to help you get out of this costly co-dependent relationship and start saving an avg. of +$2,700 per vehicle acquired with AccuTrade. 

How? Tap into the stream of high-quality used cars that come through your service drive every single day. All you need to do is empower your team with a simple appraisal process that gives your customers instant, guaranteed offers.

Watch this demo to see how it works. Then, hear how the team at Germain Toyota has used it to avoid spending fees, shipping costs, and time at auctions for over 2 years. 🤯

More tough news for Stellantis dealers. I heard from the owner of a top 150 dealer group that Stellantis is switching dealer incentives in a big way this month.

The main gist? They’re reportedly switching certain dealer incentives from selling vehicles to accepting vehicles from Stellantis HQ. The potential motivation: To force dealers with unsold inventory to accept even more units from Stellantis.

This means Stellantis dealers won’t earn incentives for providing great customer service or moving units on their lots, as is the case with most other OEMs. So the question is why would Stellantis implement this strategy? Short term move, if you ask me. (Yes, I just answered my own question)

We’ve got tons of great jobs hitting the CDG Job Board right now. Here are some standouts for anyone looking for their next move—and today, we’ve got opps all over the country.

• BizzyCar (a B2B SaaS company that develops software for auto dealers) is hiring account execs in Orlando and LA, plus a VP of Product (remote).

• Our friends at Fullpath are expanding their mission to disrupt dealer tech with job openings all over the US, including NYC, Charlotte, and Salt Lake City.

• And if you want a remote role, AutoPayPlus (an automated loan payment service) is hiring a remote agency development manager and Credit Acceptance (a publicly traded financing biz that’s been around since 1972) is hiring a remote area manager.

Looking to hire? Add your roles today—it’s 100% free.

• The latest inflation data is in, and auto insurance is again leading price growth—insurance costs soared 22% annually from March 2023, the biggest jump since 1976.

• Here’s how AI is reshaping the auto industry, according to CB Insights.

• Ford is getting ready to resume shipping its all-electric Lightning F-150 following some quality issues.

• Retail used vehicle sales jumped 18.5% month-over-month in March, according to Cox.

• These are the five most in-demand cars for 2024.

Thanks for reading. Last week, I asked you what you thought of Mazda’s future—sleeper standout or nothing special. The results were astounding…83% of you said you were confident in Mazda’s direction. 

Thanks for participating, and I’ll see you next week.

—CarDealershipGuy

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