BYD falls short as Tesla remains the unrivaled leader in the electric car industry

Tesla has achieved a remarkable feat by selling a record number of electric cars in the fourth quarter of this year, surpassing market expectations and reaching its 2023 target. However, in the last three months of 2023, Tesla lost its position as the world’s leading electric car manufacturer to China’s BYD.

In the period from October to December 2023, Tesla delivered a total of 494,989 electric vehicles globally, slightly lower than BYD’s figure of 526,409 cars. BYD, backed by US billionaire Warren Buffett, achieved this result mainly due to the strong demand in the domestic Chinese market, indicating a preference for more affordable models in a thriving economy.

Throughout 2023, Tesla sold a grand total of 1,808,581 electric cars, with the majority (1,739,707) being Model 3 and Model Y vehicles. The remaining 68,874 cars consisted of Tesla’s other models such as Model S, Model X, Cybertruck, and Semi.

Although it fell short of CEO Elon Musk’s ambitious target of 2 million cars per year, Tesla’s total sales for 2023 still outpaced BYD. Last year, the Chinese company delivered a total of 3,024,417 cars, including both electric cars and plug-in hybrids.

Compared to 2022, Tesla experienced a sales growth rate of 38%, maintaining its position as the largest electric car manufacturer globally. In contrast, BYD achieved a growth rate of 62.3%.

Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, suggests that BYD’s successful sales can be attributed to their price reductions. “Both companies are likely to experience a decline in profits due to this ongoing battle, but BYD believes it is a necessary sacrifice in order to gain market share and recognition,” said Streeter.

Tesla, on the other hand, has increased its discount rates and introduced incentives such as 6 months of free fast charging for customers who receive their cars before the end of December 2023. These measures were implemented to boost sales before certain versions of the Model 3 lose tax credits in 2024. As a result, Tesla’s sales in the last quarter of 2023 grew by 11% and exceeded the industry’s estimated figure of 473,253 cars.

Tesla set a sales record of 494,989 cars in the fourth quarter after pausing production in the third quarter to upgrade its assembly line, bringing the total production for 2023 to 1.85 million cars. Gary Bradshaw, Portfolio Manager at Hodges Capital, praised Tesla’s sales performance as being “much better than those of domestic US car companies.”

Another domestic competitor, Rivian, also reported sales for 2023, which were below market expectations due to a drastic decline in the demand for electric vehicles. The market downturn has led US automakers, including Ford and General Motors (GM), to adopt a more cautious approach to their electric vehicle production plans.

Some analysts predict that Tesla may need to continue implementing price cuts in order to sustain consumer demand, particularly after the expiration of tax incentives under the Inflation Reduction Act (IRA) this year. Seth Goldstein, Stock Strategist at Morningstar, stated: “In light of the lost tax credits, Tesla may have to further reduce prices, especially for the Model 3 versions.”

It’s important to note that the rear-wheel drive (RWD) versions and long-range variants of the Tesla Model 3 are no longer eligible for a $7,500 federal tax credit this year due to updated supply chain requirements. In the fourth quarter of 2023, the Model 3 and Model Y duo accounted for 461,538 cars in Tesla’s total sales, while the remaining 23,000 came from other models.

Currently, Tesla is facing regulatory scrutiny regarding its self-driving technology. The company recently had to recall over 2 million cars to implement new safety measures in its Autopilot advanced driver assistance system following concerns raised by a federal regulatory agency.

Consumer Reports, a highly influential non-profit organization in the US, conducted preliminary evaluations and found that Tesla’s software update to address the issue was insufficient in preventing misuse and driver inattention.