En 2023, the Japanese group Toyota retained the lead in the world ranking of automobile manufacturers, with nearly ten million cars sold. The information, which once would have made the headlines of the economic press, has been largely eclipsed by another competition: that of becoming the first manufacturer of electric vehicles. For the first time, it is a Chinese brand that is in the lead. BYD in fact took first place from the American Tesla during the fourth quarter. Elon Musk’s brand nevertheless remains the best-selling throughout the year.
From now on, all eyes are on this market segment, which, after a century of undisputed reign of the thermal engine, is set to become the main vector of growth and profits for this industry.
If the rivalry between BYD and Tesla is only just beginning, it is already rich in lessons. First, first place is between two companies which very recently launched into automobile manufacturing, in the same year, in 2003. There was therefore no bonus for historic manufacturers. In barely two decades, Volkswagen, Ford, Toyota and Stellantis have already found themselves in the uncomfortable role of challengers and are forced to deploy colossal resources to catch up in electric vehicles. It only took a few years for the new entrants to master the industrial part of assembly. At the same time, they have taken a considerable lead in what now constitutes the added value of a vehicle: the battery and software.
Gigantic national market
The second lesson is that there is no universal strategy to dominate this market. Tesla’s trajectory is very different from that of BYD. The American group is positioned on high-end models with high margins, while the Chinese manufacturer rather offers small models at low costs. Even if the dynamics are favorable to BYD in terms of sales volumes, Tesla maintains solid strengths in terms of profitability.
Then, Tesla is already a global manufacturer, with factories in the three main markets in the world: the United States, China and Europe. BYD, for its part, has built its success largely thanks to the dynamism of its gigantic national market and the government’s subsidy policy aimed at encouraging this industry.
The race will now be decided on the Chinese group’s ability to develop abroad at a time when sales in China are starting to slow down due to a less buoyant economy and increasingly intense competition. For BYD, the challenge is not obvious, given the regulatory and commercial barriers that the United States and Europe are erecting. By announcing in December the construction of a first factory in Hungary, the Chinese group intends to thwart these protectionist measures by becoming a European manufacturer.
The rise of Tesla and BYD is not irresistible, but the historic manufacturers will have difficulty stemming it. From this year, the two groups will each sell more than two million electric vehicles. At this stage, no other manufacturer is capable of competing with such economies of scale, a determining criterion in this industry. Then, they have more room for maneuver than their competitors to play on prices and take market share. A new global hierarchy is being established, undoubtedly lastingly.