Tesla’s significant price reduction in China has backfired, as the company’s market share in China has been eaten away by BYD, which means that Chinese automakers are expected to surpass foreign competitors in passenger car sales by 2023.
In order to win back lost ground in the fiercely competitive Chinese market, Tesla began to lower the prices of its cars last year, triggering a price war in China that has hit European, Japanese, and other American car manufacturers. However, Chinese consumers have responded to the price cuts by purchasing cheaper and newer BYD models. In the first two months of this year, BYD’s sales in China were more than five times those of Tesla.
Chinese brands are expected to surpass foreign competitors for the first time
Bill Russo, founder of Shanghai-based consulting firm Automobility and former China head of Chrysler, said Tesla’s decision to lower prices in October last year was a “nuclear” option that prompted most companies in the industry to follow suit. “Foreign brands are clearly losing market share, so we expect that 2023 will be the first full calendar year in which local brands surpass global brands in sales,” Automobility’s data shows that Chinese automakers accounted for 47% of total passenger car sales last year.
As demand for electric cars slows down, foreign carmakers that once dominated the Chinese market have suffered the most severe blow. In the first two months of 2023, Chinese automakers’ passenger car sales only declined by 1% year-on-year. In contrast, German automakers fell by 21%, Japanese automakers fell by 40%, Korean automakers fell by 25%, and American automakers fell by 13%.
BYD’s strong financial performance signals its rise. As the global automotive industry strives to move away from internal combustion engines, the company’s vertically integrated structure has brought it advantages. BYD’s vertical integration covers fields including mining, batteries, and chips.
On Wednesday, BYD Chairman Wang Chuanfu said he expected Q1 sales to increase by 80% YoY, and weaker competitors would be “eliminated.” Previously, BYD announced that net profit in 2022 skyrocketed by more than 400%, reaching 16.6 billion yuan (approximately $2.4 billion).
In January and February of this year, BYD’s market share in China’s plug-in hybrid and electric vehicle sales market increased from 34% last year to over 40%, while Tesla’s share slightly decreased to 7.8%.
