Tesla Had A 20-Year Tech Advantage That Ended in 2023 — Now Comes China.

Warren Buffett Was Right — BYD Could Turn Tesla Into The Ferrari Of The EVs.

Nothing is wrong with Ferrari.
Nothing is wrong with Warren Buffett.

It’s just the business world. But let’s take a step backward.

Warren Buffett never said that BYD would surpass Tesla in sales. But his firm bet on BYD. They invested a huge chunk in that company. They paid around $225 million to own around 10% of that company. So he might as well just have said that. That $225 million transformed into $7 billion at its peak last year.

But since then, they decreased their stake in BYD significantly. Buffett said that he does not want to compete with Musk. The story could end there. It could be said that Buffett made a sum of money betting on that Chinese car manufacturer and parted ways (ish.)

But then China became on track to surpass Japan as the world’s biggest car exporter…

PS — 96% of my time is invested in my newsletter (1.4m views and 45k readers). Here’s a link if you wish to become part of my network.

That doesn’t mean they’re the biggest EV manufacturer.

They don’t even have the biggest car company.

VW made $335 billion in revenue last year.
Toyota made $274 billion.
Tesla made $81 billion.
BYD made $59 billion.

So what’s the big deal? Let’s add more juice to the above numbers so that you can see the full picture.

Musk on BYD in 2011 (Laughingly): “Have you seen their car? I don’t think it’s particularly attractive; the technology is not very strong. And BYD as a company has pretty severe problems in their home turf in China. I think their focus is, and rightly should be, on making sure they don’t die in China.”

As a company founder, if I would read that Elon Musk, the world’s richest person, wrote this, I would be disappointed. Heck, I would be slightly demotivated if I worked there at that moment (Although in 2011, Musk was nowhere close to being that rich.)

But you know what BYD did? They continued working normally, and their government supported them with funds.

Tesla, on the other hand, created the cyber truck. Their government is not the biggest fan.

I mean, it depends on who’s sitting on the chair. Actually, it doesn’t. People in power usually have a problem with Musk. Also, I don’t want to go political as China has multiple human rights concerns as well. Let’s stick to business. Erase this paragraph from your memory.

So yeah, before Tesla wrapped up last year, something interesting happened.

BYD sold more electric vehicles than Tesla in the last three months of 2023.
In Southeast Asia, BYD has a 43% market share in electric vehicles.

Now, we’re purely talking about EVs. So yes, they’re a threat to Tesla, and given the history of manufacturing in China, I would bet on BYD growing at an unstoppable rate.

When it comes to manufacturing, China does something better than everyone.

Look around you; how many things are “made in China”?

Your iPhone is made in China (Maybe not in a few years, but it still is.)
Your Ikea chair is made in Sweden. I’m kidding; it’s probably made in China.

I wrote an article about Tesla a while back, and I was surprised by some of my US-based readers anticipating this. They’d say a couple of things:

Tesla’s cars are not that good (Oh, and their customer support needs improvement.)
Chinese EVs are a threat to Tesla.

That was two years ago. BYD was far from Tesla at that stage. But they were both playing in different environments.

China’s global manufacturing output in 2018 was 28.14%, while the US’s was 16.6%.

Let’s close up on both companies in terms of revenue.

Tesla’s Revenue

BYD’s Revenue

You’ll need to go back and forth to spot a difference in both those charts. But there’s one thing you should know that’s critical.

The revenue of Tesla is purely from EVs.
The revenue of BYD is not only from EVs.

Tesla makes a good profit margin from each vehicle (sometimes reaching 20%, which is enormous for a car manufacturer, which Tesla isn’t… or is it? Let’s not get into that debate right now.)

Okay, here are purely EV numbers:

Then, in Q4 of 2023:

Tesla sold 484,000.
BYD sold 526,000.

The Road Looks Bumpy For Tesla and Clear For BYD.

What have you heard about Tesla’s CEO recently?

Drugs?
Anti-Semitic?
Sexual harassment?
Curses the Disney CEO?
Launches a chatbot on X?

What have you heard of the BYD CEO? Nothing…

It’s easy to move forward when you know what you’re doing.

Apple focused on iPhones and became worth $2.87 trillion.
Nvidia used the AI boost to build hype and become the AI company that everyone needs. They’re now worth $1.34 trillion.

Tesla’s CEO is a superstar focused on space, social media, AI, health tech, and transportation/energy companies. But he’s only human at the end of the day.

Musk said that Tesla is not really a car company, which many people would agree on. But many others would disagree with that.

Even if the founder of the company does not believe it to be a car company, Tesla is a public company that is worth $732 million because of the retail investors who poured in money as they believed in it.

It could be an energy company, but its automotive contribution at the moment is much larger than the energy aspect. Let’s give it another ten years and re-open this conversation.

But for now, go talk to a random stranger and ask them if they know Tesla. They’ll tell you, “Of course! The car company.”

That’s my take on it. Let’s start the fun Musk-EV-Tesla-China discussion in the comments, as usual. This is not our first rodeo and won’t be our last. I’ve invested in Tesla, read all the books about that company, and almost all the ones about Musk (Walter Isaccsson missing.)

I believe the company changed the future. But I believe the history is not in their favor at the moment and that BYD (or other Chinese EV auto manufacturers) are going to apply more pressure with their manufacturing power.

Tesla had a twenty-year advantage where no other company could reach its technology. Those twenty years ended in 2023.

Alright, now that you’re fuelled up, head to the comments. I won’t skip a single comment on this article specifically. It gives me joy to engage in such discussions. Yes, I’m like that.

I’m AL, a business consultant in Zurich, Switzerland. I believe in the power of delivering value to you, the reader. Follow me on various social media platforms if you’re interested in the value of my content.