China’s largest electric vehicle producer, BYD, recently dethroned Tesla, with the Chinese car manufacturer’s quarterly revenues exceeding Tesla for the first time. BYD sold 1.1 million cars in the three months to September (an increase in sales of 24%), resulting in their quarterly revenue outstripping Tesla’s by $3 billion. BYD has secured its position as the market leader by introducing longer-range models at lower prices, while Tesla’s product range models at lower prices, while Tesla’s product range has become outdated with the company’s recent focus on automation proving unsuccessful to date. 

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High levels of vertical integration within BYD’s production have given them a competitive advantage against others in the industry, resulting in higher gross margins than Tesla, as well as other Chinese rivals. This vertical integration has been one of the cornerstones of BYD’s success, with the vast magnitude of their production meaning they benefit from economies of scale and their in-house battery production capabilities reducing costs. In contrast, Tesla sources most of its batteries from other companies such as Panasonic Energy and LG Energy.​

 

However, despite BYD’s recent success, with their market value rising roughly 55% YTD, a backdrop of rising protectionism and geopolitical tensions may stifle future growth. China’s recent dominance in the EV market has led to the EU implementing significant import tariffs on Chinese vehicles. This is the consequence of European carmakers begging for tariffs, due to poor performance. Volkswagen for example has had to close factories in Germany for the first time and lay off tens of thousands of workers due to a loss of market share. Extensive Chinese subsidization of cars, means that EU producers are 

unable to compete on price, which has meant the bloc has had to resort to protectionist measures. BYD’s market dominance has meant the carmaker has been hit with EU tariffs of 17% on battery-powered vehicles, on top of the already existing 10% tariff. I would argue that in the short-term this is unlikely to significantly impact BYD’s upward trajectory as the vast majority of their sales are within their domestic market, with overseas sales only accounting for 7.8% of total monthly sales in September. However, in the long-term, these tariffs may play a more significant role in hindering BYD’s growth as analysts expect BYD to soon focus on growing their international sales. With the newly elected US President Donald Trump vowing to implement tariffs of 60% or more on China, BYD’s position at the forefront of the EV market may prove to be short-lived.

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BYD’s rise to the top is not only due to the firm’s incredible growth but also due to Tesla’s decline. The recent US election has meant Tesla has reclaimed its $1 trillion.  market cap for the first time since 2022. Nevertheless, the recent performance of Tesla’s stock price has masked the poor sales and product showcases of the company in 2024. Tesla’s Q2 net income fell 45% this year and more recently the company missed its Q3 revenue expectations (although it should be noted that the Q3 earnings release was viewed positively by investors due to high earnings per share). The company failed to impress at its recent ‘cybercab’ event where it unveiled plans for a fleet of autonomous robotaxis as well as household Optimus Robots intended to be ‘the biggest product ever of any kind’. The two-seater taxis as well as the humanoid robots are supposed to eventually be available for less than $30,000. The event left investors unimpressed due to a lack of detail on the technology behind the autonomous vehicles and how Tesla aimed to reduce their cost. Following the event Tesla shares fell 9% and at the time this left